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Financing For Rental Properties 2020 - YouTube
Channel: Redacted
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let's talk financing for rental
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properties tonight it's a question we
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get an
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awful lot around here can i get a
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conventional loan on an investment
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property what is
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non-recourse financing can i get
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a va loan and buy a rental property i'll
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answer all of those questions
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and as many as i possibly can on today's
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show
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for those of you who don't know me i'm
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clayton morris i'm the founder of the
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company called morris invest
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we are a full service rental real estate
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company that means that we build the
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properties new construction properties
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from the ground up
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with high-end features like stainless
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steel appliances
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and granite countertops and we rent them
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out to great tenants so our clients get
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a cash flowing property from day one
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and we have all types of financing built
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into our property so we know a thing or
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two about these types of financing
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options and we've seen it all
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like the state farm or the farmers
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commercials we've seen it all
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so what is an investment property well
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an investment property includes
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any residence from which that you can
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earn a rental income
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or you purchase to flip and sell for a
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profit it could be a condo an apartment
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manufactured home a house can qualify as
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well
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or a rental property even if you live in
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it yourself for part of the year just
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part of the year
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investment properties usually refer to
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one to four
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unit residential homes rather than
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commercial properties which are
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apartment complexes those are like five
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units and above and shopping centers
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that's not what we're talking about
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so what is an investment property loan
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how do you get it
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well investment property loans carry
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higher mortgage rates
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and there's stricter lending standards
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than standard mortgages
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they include a higher down payment
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amount that's
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very important for you to understand
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it's not much but it is higher
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and a qualify for investment property
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financing on a single family home
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you'll need a down payment of at least
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15 to 20 percent
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if you have good credit you may qualify
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for the lower 15 down amount depending
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on the lender
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you can find them rental property loans
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from multi-family homes
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require a 25 down payment
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now one of my favorite tools is the
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conventional loan folks because
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let's be honest rates are freaking low
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right now lower than i've ever seen them
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in my lifetime
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we had a client just recently lock in a
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30-year loan
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last week at 2.85 percent 2.85
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that's like free money so let's talk
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conventional investment for
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a while in property financing a
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conventional loan is your
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only option if you want to buy a true
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investment property that is a property
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that you plan to rent or sell
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but not live in it okay not living in it
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so conventional loans require a 15 to 25
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down payment depending on the type of
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property you're buying and the credit
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score minimums will be
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higher than the government programs okay
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however so you need to be around 680
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however you also have the flexibility to
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own the property
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without a residency requirement okay
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it's important
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an fha multi-unit financing here's the
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next one that are loans that are backed
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by the federal housing administration
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fha
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they're attractive if you're struggling
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to save up for a big down payment
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or if your credit score is under that
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620 range the credit score and your down
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payment requirements for an fha loan
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for an investment property are lower
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than conventional loans
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and you can use rental income to qualify
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which is awesome
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but there's a catch you must reside at
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the property
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for a minimum of 12 months so what about
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a duplex
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great idea right let's talk about a va
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multi-unit financing these are loans
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guaranteed by the us department of
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veterans affairs va
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you don't have to have a minimum credit
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score or a down payment requirement
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and you can qualify as acti active duty
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service members
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veterans and eligible spouses can use a
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va loan
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to buy a property up to seven units
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including one designated for business
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now the borrower must live
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in one of the property units or intend
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to live there we'll talk about that in a
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little bit
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then you have alternative financing
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perhaps you have a substantial down
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payment excellent credit score
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but you will want to avoid the
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cumbersome income documentation process
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required by all the institutional
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lenders out there
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so you know there's all these different
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forms of it so if that's the case
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you might have a debt to service ratio
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loan through a banker or a mortgage
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broker might make sense for you
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but an alternative loan will likely
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carry a higher interest rate
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than any other form of financing but you
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might get a lower monthly payment
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with an easier loan process so to
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qualify you're gonna need a high credit
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score and a down payment of 25 to 30
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percent
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and you need proof that your monthly
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rental income is
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at or above your monthly loan payment
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all right now let's talk about two of my
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other favorite options right now
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and one of those is fund and grow
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okay many of you have heard me talk
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about them before we've got a tab
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on our website uh called funding so if
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you go to morrisinvest.com
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funding you'll see the funding tab right
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there and you'll see how to
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qualify with fund and grow now we give
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you five hundred dollars off
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your sign up with them because we've
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partnered with them so if you sign up
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through our website you'll save five
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hundred dollars
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but it's very it's a lot better than a
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hard money loan i saw a question earlier
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before we started the show about hard
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money loans
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and because you're not paying all the
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points
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and the additional fees that you get
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from hard money loans
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the fee that you pay to work with fund
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and grow is way less
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than you would get if you worked with a
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high with a with a traditional
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hard money lender to get money now what
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they do
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it's very fascinating you can watch the
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full video again go to our website
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and you can learn a lot more about how
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you can get zero percent
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interest funding through them with
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business credit cards
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so what they do is they'll work with you
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and they'll get you multiple business
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credit cards they'll set up an llc for
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you
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they'll go through the whole process
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they'll negotiate with the banks
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we've done full videos here with the
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team over at funding growth so please
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check out those videos if you want
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further information about it
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and then you'll be able to use the money
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on those credit cards
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at zero percent for like the first year
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now this is great if you want to get
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into a property rehab it
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um or even do a buy and hold property
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that you're going to cash out refinance
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so pulling the money back out of it this
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is a process i've gotten about a hundred
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and seventy thousand dollars
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in financing from them in my first round
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then i got ninety thousand in my second
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round of financing with them
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and i was able to buy multiple rental
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properties using this method
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at zero percent interest and then we
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refinance the property into a 30-year
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loan
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after that it enabled me to jump on a
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deal quickly
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and have zero percent interest it's a
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fantastic vehicle plus because they're
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using business credit cards
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you get to travel for free you get like
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airline miles and bonuses and cashback
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rewards
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it's really killer so if you're
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interested in that as an option
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again go to our website it's
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funding now one of my other favorite
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ways
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is non-recourse financing now this is
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going to blow your
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mind if you don't know what this is now
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for a lot of
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international investors you might
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already know about this because
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you don't have residency in the united
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states you don't have a bunch of other
[439]
things set up in the united states and
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that's okay
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because non-recourse financing is tied
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to the investment property itself
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so we've partnered with a bank let me
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give you an example okay let me give you
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one of our new construction town homes
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right that we have for sale right now
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it's just completed there's a tenant
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living in the property
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brand new construction when we partner
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with the banks on non-recourse financing
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they're involved in our entire process
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of the building of it
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they're analyzing the neighborhood
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they're looking at the
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the floor plans and the drawings before
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we even build the property
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they're studying the demographics of the
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neighborhood
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then they're allowing us to build in
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non-recourse
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financing into the finished product for
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a client
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so what do what do i mean i'm going to
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go a little bit deeper here and
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don't don't lose me because this is an
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amazing form of financing
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the bank says okay we are going to
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put our name and money on the asset
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itself
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the property itself not you the borrower
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did you hear me it's not tied to your
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personal name
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so with non-recourse there's no recourse
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for you
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if you vanish disappear to guatemala
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that bank has already said this is a
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great property
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it's appreciating there's a tenant
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living in the property paying the rent
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it's brand new construction we've
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studied the demographics of this
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neighborhood
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we are putting our money in position on
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this property not you
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you disappear to guatemala they take the
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property back
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and it's a great asset for them it's
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rare
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to find this it takes about a year to
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set up non-recourse financing
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so we've developed these relationships
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internally at our company
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so that anybody who wants non-recourse
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financing with our properties can get it
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when you close what's great about it
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though is that
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like i said you have a variety of
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options that you can use
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even with using retirement vehicles i
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mean you can use part of a
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401k um you know an ira
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self-directed ira plus non-recourse
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financing you can be living overseas
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and not have all of the things that you
[577]
would need as a us citizen to invest in
[579]
the united states
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so there's incredible things that come
[582]
with non-recourse
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financing now let's talk about the down
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payments are going to be a little higher
[588]
usually around 35 40 down
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on non-recourse financing and the
[593]
interest rate will be a little bit
[595]
higher
[596]
but again it's not tied to your personal
[599]
name
[599]
so when you're going to when you're
[601]
getting conventional financing on a
[603]
property you can only get
[605]
up to 10 rental properties under your
[607]
own name
[609]
or you know you're only allowed 10
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rental properties
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with conventional financing what do you
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do after 10 properties how do you get
[618]
additional
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rental properties you can't with
[621]
conventional financing
[622]
so you need to get non-recourse or some
[626]
other method
[627]
and what's great about non-recourse is
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that it also allows you to buy the
[631]
property in
[632]
an llc you and it has to be an
[635]
investment
[636]
they want it in an llc so you you buy it
[638]
with a
[639]
your own company for liability
[641]
protection it's not tied to you
[643]
personally
[644]
it's a powerful way of acquiring real
[647]
estate
[647]
so when someone says to me that they
[650]
don't know how they can get started in
[651]
real estate investing
[652]
there are so many creative ways that we
[654]
can pull together and think about here
[656]
you know buying a property with
[658]
conventional financing right now
[660]
using a portion of your solo 401k or
[662]
self-directed ira
[664]
as a down payment and then on top of
[667]
that
[667]
adding in you know non-recourse
[670]
financing or
[671]
conventional financing pairing these
[673]
programs together
[674]
a lot of times we'll talk to clients on
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the phone and they're blown away they
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didn't know they could pair these things
[679]
up
[679]
they're like oh my god i've had forty
[681]
thousand dollars in this retirement
[682]
account that's been sitting there doing
[684]
nothing you mean to tell me
[685]
that's all i need for a down payment i
[687]
can use that 40 or 45
[689]
000 is the down payment and then get an
[692]
interest
[693]
2.85 loan for the rest
[696]
that's like free money and then you get
[698]
the tax benefits of
[700]
owning the rental property and it
[701]
becomes like a wash right you're on that
[703]
down payment almost you get fully back
[705]
on your taxes if you do it properly
[707]
so those are some basic ways i look for
[710]
in my real estate
[711]
financing options let's talk about is it
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hard
[715]
to get a loan a lot of people ask this
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question is it hard to get a loan
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to finance a rental property and the
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answer is no
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the answer is no look if you've got a
[726]
620 credit score
[728]
or even higher then you can find
[730]
financing for rental properties
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and like i said before if you've got
[733]
above a 620 credit score
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620 is kind of the cutoff right you can
[739]
work with fund and grow
[740]
on our website if you go to
[741]
morrisinvest.com funding
[743]
that's really the cut off there and
[746]
they'll actually work with you to
[747]
improve your credit
[748]
so that by the time you're done working
[750]
with them you've got a 700 credit score
[752]
or even higher
[753]
so that's not a limitation okay credit
[756]
scores
[757]
yeah it's a little bit but there's also
[759]
non-recourse financing
[761]
not tied to your personal credit so if
[764]
you're worried about credit
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there are ways around it okay um how do
[768]
you
[769]
how do you finance a rental property
[772]
well i've just given you so many options
[774]
people wonder
[775]
how can i do this do i have to just do
[777]
conventional and no you don't have to
[778]
just do conventional
[780]
you can work with private money lenders
[783]
you can work with non-recourse lenders
[785]
you can work with fund and grow you can
[788]
partner up
[788]
with a number of individuals so there
[790]
are maybe three friends that you have
[792]
you all have thirty thousand dollars
[795]
maybe you come together the three of you
[796]
form an llc and buy rental properties
[799]
that way
[800]
so that one person doesn't have to carry
[802]
the burden there are multiple ways to do
[804]
this
[805]
just gotta get creative and think about
[806]
it how many loans can i get for a rental
[810]
property this is another great question
[811]
that we get on a regular basis and if
[813]
it's conventional
[814]
10 is the amount of loans you can get
[817]
conventional financing up to 10
[820]
um and then you'd have to look at other
[822]
alternatives that's why the beauty of
[823]
non-recourse financing we have a lot of
[825]
clients who own
[826]
you know eight nine ten properties they
[829]
come to us and like
[830]
i can't get any more conventional
[832]
financing what do i do
[833]
and we'll tell them great guess what you
[836]
can
[836]
use non-recourse financing and get as
[839]
many properties as you want
[841]
inside of your llc there's no limit to
[843]
what you can do
[845]
i want to go back and talk about the va
[847]
loan just a little bit because
[849]
this is fascinating and it's not that
[852]
strict
[853]
now we've had mike foster here on the
[855]
show before he's a he's written a book
[857]
on um on military house hacking he was a
[860]
great guest he's become a great friend
[861]
of our show
[862]
and one of the things that he talked
[864]
about is that you have to show
[866]
intent that you plan to live in the
[868]
property when you're buying it so let's
[870]
say let me just throw out a hypothetical
[872]
okay you work with us
[875]
because you want to buy one of our new
[876]
construction duplexes at our country
[879]
at our company so you intend
[883]
to buy it because you want to live in
[885]
one half of the property in texas
[888]
you get a va loan for that rental
[890]
property you get your electric turned on
[892]
in your own name
[893]
you you know get uh your gas turned on
[896]
in your own name
[898]
you plan to move to that duplex and
[900]
you're going to rent out the second half
[901]
of that duplex
[903]
no all the wheels are in motion you're
[905]
moving there right you've already got
[906]
the va loan on the property
[908]
right with zero percent down by the way
[911]
this is the beauty of
[912]
a va loan no money down like come on
[915]
right if you have access to a va loan
[917]
take it do not waste this opportunity
[920]
and please please please if you've got a
[922]
va loan
[924]
don't buy a house for you to live in
[926]
that's a single family
[927]
buy a four unit buy a duplex buy a
[931]
triplex
[931]
and live in one side of it rent out the
[934]
other sides
[935]
and then move after a little while you
[938]
don't have to stay there
[939]
but you have to show intent that you're
[941]
going to live there and i would say you
[942]
know maybe live there for
[944]
six months do what you need to do to to
[946]
solidify that loan
[947]
and prove to the va that you're
[949]
intending to live there
[951]
but that is an amazing opportunity zero
[953]
percent down
[955]
and the interest rates are great right
[956]
now as well but you just have to show
[958]
that intent
[960]
now as mike pointed out in our
[961]
interviews with him he said
[963]
you know va loans they really favor
[965]
active
[966]
duty but veterans are also
[969]
considered an essential part of this
[971]
they're just they look
[972]
they really kind of work the the loan
[975]
itself is set up more for
[976]
active duty so there you go folks those
[979]
are some great ways
[980]
to finance rental properties you've got
[982]
conventional financing right now
[984]
we have we work with a lot of clients
[986]
that do conventional financing we have
[988]
great lenders that we work with so if
[989]
you book a call with us at morris invest
[991]
we'll
[991]
help you with that 2.85 right now
[995]
are you kidding me again that's like
[997]
free money
[998]
then we've also got non-recourse
[1000]
financing which is the
[1002]
asset itself is being um provided
[1005]
financing by
[1006]
by the bank not you the person that
[1009]
means it's great for international
[1010]
investors and people who want to exceed
[1012]
that 10
[1013]
property limit we've also got va loans
[1016]
we've got hard money lending that's
[1018]
available we've got fund and grow
[1019]
options that allow you to get money for
[1021]
even if it's just a down payment at zero
[1023]
percent interest
[1025]
a whole boatload of opportunities for
[1027]
you to get some
[1028]
free money some great money remember
[1032]
nobody really has gotten wealthy with
[1034]
their own money completely
[1037]
mostly all millionaires i know have used
[1040]
other people's money as leverage to
[1043]
build
[1044]
wealth a bank is willing to lend to you
[1046]
they want to lend to you
[1048]
work with them get some great get some
[1051]
great opportunity
[1052]
for leverage right now and buy a rental
[1054]
property
[1055]
i mean we're sitting on amazing amazing
[1058]
interest rates right now folks
[1060]
jump take advantage of this while you
[1062]
still can so
[1064]
that is my look at financing for rental
[1066]
properties i hope i answered some great
[1068]
questions for you
[1069]
now we're going to open it up for a lot
[1070]
of other questions and answers here on
[1072]
the show
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