Non-Owner Occupied Home Loans
Saying this, it is exceptionally important to get the counsel of an experienced accountant and attorney to insure you get the best tax and business advise you can.
In addition to an attorney and accountant, you'll also need good counseling from a company with investment property experience. At 1st Continental Mortgages, we deliver!
Yes we indeed do 95% financing on investment properties in addition to financing manufactured homes.
All loan product availability is subject to market conditions. We understand one of the most important aspects of any property is your cash flow. Through the course of investing, you have learned that lenders only allow 75% of the rental income to be used for benefit. This is to account for the vacancy and repair factor. While it is difficult to control the vacancy issue, overhead costs on properties can be controlled.
Our personal assessment of the SFR investment market is such:
The ideal property to buy is the new home, preferably during the initial stage of building in a subdivision. Homes in general have a natural market appreciation factor that varies by market and state. On average, a new home will appreciate 3% to 9% annually. The older a home gets, the lower the POTENTIAL appreciation rate becomes, and conversely, the higher the POTENTIAL overhead exposure is.
The beauty of focusing on "moderate" new homes is the fact properties are priced such that they are still affordable "rental" homes. In addition, a new home is FULL of warranties, which means you control your overhead by minimizing exposure. Typically, you won't have maintenance issues until the 6th year.
While some builders may be reluctant to offer New Home warranties on investment properties, they will certainly negotiate with an investor prepared to purchase two, three or six homes in a subdivision. Not only will they negotiate warranty, they will be more than willing to negotiate price, which can net a higher ROI when the property is sold.
By making the acquisition on a 5 year program you can significantly improve your rate utilizing the 5/6 or 5/1 LIBOR program. As a short term holding, this allows you to "bank" the equity on a monthly basis rather than attempt to figure out how to get to it down the road.
Even if you decide to hold onto the property, you simply rate and term into another program after 5 years that better suits your long term strategy. With the appreciation, the lower LTV simply opens up more options and a reduced rate of interest. (Depending on market flux)
The principle benefits of the interest first option for short term investment properties are; Better rates on the 5/1 program; The typical investor has an improved opportunity to go Full Doc due to better ratios based upon the improved positive cash flow for the property(s). This can significantly improve rate and in doing so, increase profit; The typical investor, can better utilize the net gain from rental income to invest in additional rental properties, allowing for faster acquisition of new properties and future profit.
Appreciation Example:
A 100K home with an average appreciation of 3% will be worth $115926.00 in 5 years.(The average appreciating in Florida over the last three years has been 9%.) On new homes, you can expect that appreciation to be much higher as the development is finished out and the number of available homes is reduced.
This is just one way of approaching the rental market to maximize profit, and we believe it to be one of the more profitable methods. Your 1st Continental Mortgages Specialist is ready and available to "talk shop" about your investment needs. Just give us a call!
