{"id":954,"date":"2024-08-12T15:07:48","date_gmt":"2024-08-12T19:07:48","guid":{"rendered":"https:\/\/rentpost.com\/resources\/?post_type=manual_kb&#038;p=954"},"modified":"2024-08-12T15:07:50","modified_gmt":"2024-08-12T19:07:50","slug":"get-investment-property-loans","status":"publish","type":"manual_kb","link":"https:\/\/rentpost.com\/resources\/article\/get-investment-property-loans\/","title":{"rendered":"Where to Get Investment Property Loans in 2024?"},"content":{"rendered":"\n<p>One of the biggest hurdles most aspiring landlords face is figuring out where to get investment property loans. Conventional wisdom says to just walk into a bank and see what is in store for you. But the problem is, that may be the worst thing you can do.<\/p>\n\n\n\n<p class=\"has-text-align-center\">&#8220;<em>I would say raising capital is one of the weakest things for most entrepreneurs.<\/em>\u201d<br>&#8211; Robert Kiyosaki<\/p>\n\n\n\n<p>There are a number of different things to consider before you start shopping around. You should also keep in mind the various options available for where to get financing.<\/p>\n\n\n\n<p>Let\u2019s start by considering a few factors before shopping for financing your rental property\u2019s mortgage.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What You Need Before Applying for Investment Property loan<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Knowledge<\/strong><\/h3>\n\n\n\n<p>You can\u2019t expect to get a decent loan without showing you\u2019ve done your homework. Here are a few questions your creditor may ask you:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How well do you know the neighborhood?<\/li>\n\n\n\n<li>Can you show numbers to prove that the property values will continue to climb over the next few years?<\/li>\n\n\n\n<li>What kinds of new developments (if any) are being built in the area?<\/li>\n\n\n\n<li>What are the schools like?<\/li>\n<\/ul>\n\n\n\n<p>This doesn\u2019t require too much digging. A few hours spent on Google and Zillow, plus driving around the area, will go a long way.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img fetchpriority=\"high\" decoding=\"async\" width=\"847\" height=\"653\" src=\"https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/08\/02232258\/rmb-coins-stacked-front-housing-model-house-prices-house-buying-real-estate-mortgage-concept.jpg\" alt=\"investment property loans\" class=\"wp-image-1808\" srcset=\"https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/08\/02232258\/rmb-coins-stacked-front-housing-model-house-prices-house-buying-real-estate-mortgage-concept.jpg 847w, https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/08\/02232258\/rmb-coins-stacked-front-housing-model-house-prices-house-buying-real-estate-mortgage-concept-300x231.jpg 300w, https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/08\/02232258\/rmb-coins-stacked-front-housing-model-house-prices-house-buying-real-estate-mortgage-concept-768x592.jpg 768w\" sizes=\"(max-width: 847px) 100vw, 847px\" \/><\/figure><\/div>\n\n\n<h3 class=\"wp-block-heading\">Finances<\/h3>\n\n\n\n<p>It\u2019s all about the numbers. <a href=\"https:\/\/rentpost.com\/resources\/article\/what-to-expect-property-management-company\/\">Companies or individuals willing to give you an investment property<\/a> loan want to make sure they get an ROI worth the risk they\u2019re taking. A few questions they may have include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>What\u2019s your credit score?<\/li>\n\n\n\n<li>What\u2019s your income\/debt ratio?<\/li>\n\n\n\n<li>What kind of debts do you have?<\/li>\n\n\n\n<li>How many streams of income do you have coming in?<\/li>\n\n\n\n<li>How does the home\u2019s price compare to comparables?<\/li>\n\n\n\n<li>What kind of <a href=\"https:\/\/rentpost.com\/resources\/article\/top-6-reasons-rent-apartment\/\" target=\"_blank\" rel=\"noopener\">rent can you reasonably<\/a> expect?<\/li>\n\n\n\n<li>What are the total monthly expenses, including mortgage, maintenance, and taxes?<\/li>\n<\/ul>\n\n\n\n<p>If the numbers don\u2019t make sense, it will be harder to find an investor.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Experience<\/strong><\/h3>\n\n\n\n<p>When you\u2019re first starting out, your lack of experience may concern investors. That\u2019s why you\u2019ll need something to fall back on- such as having a mentor or business partner or being part of a <a href=\"https:\/\/rentpost.com\/resources\/article\/real-estate-investment-software-prioritize-acquisitions\/\" target=\"_blank\" rel=\"noopener\">real estate investing<\/a> club. At the least, if you don\u2019t have experience, they want to see that you\u2019re learning from someone who does.<\/p>\n\n\n\n<p>Some things to think about are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Who will <a href=\"https:\/\/rentpost.com\/resources\/article\/hiring-a-good-property-manager\/\">manage the property<\/a>?<\/li>\n\n\n\n<li>How will you find tenants?<\/li>\n\n\n\n<li>Do you know local laws for landlords?<\/li>\n\n\n\n<li>How will you deal with <a href=\"https:\/\/rentpost.com\/resources\/article\/reduce-maintenance-overheads\/\">maintenance issues<\/a>?<\/li>\n<\/ul>\n\n\n\n<p>They just want to make sure you don\u2019t go in and get blindsided in the first six months. The more you treat this as a business and do the work upfront in planning, the better your chances are of getting the rental property loan. You can learn more about the <a href=\"https:\/\/pluxa-property.co.uk\/property-investors\/types-of-rental-property-loans-for-property-investors\/\" target=\"_blank\" rel=\"noopener\" title=\"\">investment property loan types in this guide<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Where to Get Your Investment Property Loan?<\/h2>\n\n\n\n<p>TL;DR<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Investment property loan Source<\/strong><\/td><td><strong>Pros<\/strong><\/td><td><strong>Cons<\/strong><\/td><\/tr><tr><td><strong>Big Banks<\/strong><\/td><td>&#8211; Considerable money to invest, Familiar to most people<\/td><td>&#8211; Different rules for different platforms, Maybe less control over property management<\/td><\/tr><tr><td><strong>Local Banks or Credit Unions<\/strong><\/td><td>&#8211; Know the local area well, More flexible<\/td><td>&#8211; Similar criteria to big banks, May still reject based on credit or income\/debt ratio<\/td><\/tr><tr><td><strong>Owner\/Seller Financing<\/strong><\/td><td>&#8211; Less emphasis on credit score, More focus on property management plan<\/td><td>&#8211; Depends on owner&#8217;s willingness, Potential &#8220;due on sale&#8221; clause issues<\/td><\/tr><tr><td><strong>Hard Money Loan<\/strong><\/td><td>&#8211; Easier to obtain, Good for fix-and-flip strategies<\/td><td>&#8211; High interest rates (11-14%), Risky for buy-and-hold strategies<\/td><\/tr><tr><td><strong>Angel Investor<\/strong><\/td><td>&#8211; Flexible terms possible, Can provide expertise<\/td><td>&#8211; Need to prove understanding of the business, May require giving up equity<\/td><\/tr><tr><td><strong>Crowdfunding<\/strong><\/td><td>&#8211; New option, Good for commercial properties<\/td><td>&#8211; Different rules for different platforms, May be less control over property management<\/td><\/tr><tr><td><strong>Friends and Family<\/strong><\/td><td>&#8211; Potentially easier to obtain<\/td><td>&#8211; Risk of damaging relationships, Mixing business and personal life<\/td><\/tr><tr><td><strong>Self-Financing<\/strong><\/td><td>&#8211; Full control, No need to convince others<\/td><td><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Big Banks<\/strong><\/h3>\n\n\n\n<p>It might be very tempting to go to a big bank- especially one you have a history with- to seek out a loan. Most of us are used to dealing with them, and they have considerable money to invest.<\/p>\n\n\n\n<p>Depending on your financial situation, you may be able to make this work. But some people will find it very difficult to get a loan this way. There are a few reasons why I say that.<\/p>\n\n\n\n<p>For one, big banks are much more rigid. They have to be, simply because of the amount of money and people they manage. They\u2019ll have a very good idea of who\/what they\u2019re willing to invest in. If you don\u2019t fit those criteria, you\u2019re out of luck.<\/p>\n\n\n\n<p>Something else to consider is they won\u2019t know your market as well as other options. Even if you present a lot of data showing the area is a great place to invest, they will be a tougher sell.<\/p>\n\n\n\n<p>Finally, big banks don\u2019t have an excellent reputation for customer service. If you get in a situation where you need help with your mortgage, you\u2019ll have more hoops to jump through here compared to the alternatives.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.moneyunder30.com\/get-mortgage-for-rental-property\" target=\"_blank\" rel=\"noopener\">Here\u2019s a horror story <\/a>of a first-time investor who tried to go with a big bank.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"681\" height=\"428\" src=\"https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/08\/02232847\/Capture-4.jpg\" alt=\"investment property loans\" class=\"wp-image-1809\" srcset=\"https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/08\/02232847\/Capture-4.jpg 681w, https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/08\/02232847\/Capture-4-300x189.jpg 300w\" sizes=\"(max-width: 681px) 100vw, 681px\" \/><\/figure><\/div>\n\n\n<h3 class=\"wp-block-heading\"><strong>Local banks or credit unions<\/strong><\/h3>\n\n\n\n<p>One great thing about smaller banks or credit unions is that they do know your area. That\u2019s part of their specialty, so they\u2019ll have a better idea of whether or not your <a href=\"https:\/\/rentpost.com\/resources\/article\/mortgage-refinancing-guidelines-investment-properties\/\" target=\"_blank\" rel=\"noopener\">property is a good investment<\/a>.<\/p>\n\n\n\n<p>Another nice feature is flexibility. They\u2019ll be more willing to work with you to negotiate a favorable deal for both sides.<\/p>\n\n\n\n<p>The biggest downside is that they will look at factors that are very similar to those of a big bank. You&#8217;re still likely to get turned away if you don\u2019t have good credit or a favorable income\/debt ratio.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Owner\/Seller Financing<\/strong><\/h3>\n\n\n\n<p>This is a great way to go if you can get the owner to do it with you. Just like it sounds, the idea is that the current owner of the home will carry the loan- and thus, the risk. So if you don\u2019t make payments, they will foreclose on the house and own it again, just like a bank would.<\/p>\n\n\n\n<p>So why is it so great? For one thing, the owner probably doesn\u2019t care about your credit score. They may look at it, but that\u2019s not a huge factor.<\/p>\n\n\n\n<p>Other traditional numbers, like income\/debt ratio, may not come into play either. They may not even think about asking you for information like that.<\/p>\n\n\n\n<p>Their biggest concern is receiving monthly payments, but they will probably evaluate you differently. They\u2019ll look more closely at your plan to market the home to tenants and manage it. They may want to know how much cash you have in case of emergencies or if the space remains empty, similar to a bank.<\/p>\n\n\n\n<p>Another potential issue is the \u201cdue on sale\u201d clause. Brandon Turner from BiggerPockets.com has a <a href=\"https:\/\/www.biggerpockets.com\/renewsblog\/2013\/11\/05\/seller-financing\/\" target=\"_blank\" rel=\"noopener\">great article<\/a> on this and the overall process. But if you\u2019re a smooth talker and know what you\u2019re talking about, owner financing is a great way to get an investment property loan.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Hard Money Loan<\/strong><\/h3>\n\n\n\n<p>This is a high-interest loan that private individuals or companies usually issue. Because the interest is so high (11-14% typically,) the money is usually used to fix-and-flip homes rather than use a buy-and-hold strategy.<\/p>\n\n\n\n<p>These can work, but you have to be cautious and only use them for their intended use. Don\u2019t get one and then rely on home prices improving by 20-30% over the next few years to make a profit. Borrowing money at a high rate like that and just praying for a bull market is a big gamble.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Angel Investor<\/strong><\/h3>\n\n\n\n<p>This term is usually used in the startup world but can also apply to getting <a href=\"https:\/\/rentpost.com\/resources\/article\/5-real-estate-investment-new-investors\/\">rental property investment<\/a> loans.<\/p>\n\n\n\n<p>You receive money from a wealthy individual (or group of individuals) to fund your project. You manage it and do all of the legwork, and they profit one way or another from their investment.<\/p>\n\n\n\n<p>Some may want equity in the property. Others may provide the funds with a specific interest rate, similar to a conventional loan. Or you may find angels who want a bit of both.<\/p>\n\n\n\n<p>Angels can be anyone from your rich uncle to a seasoned <a href=\"https:\/\/rentpost.com\/resources\/article\/5-best-real-estate-books-new-investors\/\" target=\"_blank\" rel=\"noopener\">investor you met in your real estate<\/a> investing club. They can be great backers, but you\u2019ll need to prove you understand the business and investment you\u2019re getting into before they give you their hard-earned dollars.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Crowdfunding<\/strong><\/h3>\n\n\n\n<p>This is one of the newest kids on the block, but it\u2019s exciting. The idea is similar to crowdfunding projects on sites like Kickstarter. A group of real estate investors can use websites like <a href=\"https:\/\/www.realtyshares.com\/\" target=\"_blank\" rel=\"noopener\">RealtyShares<\/a> and <a href=\"https:\/\/fundrise.com\/\" target=\"_blank\" rel=\"noopener\">Fundrise<\/a> to invest in real estate without having to deal with things like managing the property or finding a property manager.<\/p>\n\n\n\n<p>There are a number of websites like this out there now, and they\u2019re each a little different. Just keep them in mind as a possible option &#8211; especially if you\u2019re more interested in getting investment property loans for commercial properties than smaller, residential buildings.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"619\" height=\"420\" src=\"https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/09\/28170132\/capture-10.jpg\" alt=\"\" class=\"wp-image-1748\" srcset=\"https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/09\/28170132\/capture-10.jpg 619w, https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2017\/09\/28170132\/capture-10-300x204.jpg 300w\" sizes=\"(max-width: 619px) 100vw, 619px\" \/><\/figure><\/div>\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Friends and Family<\/strong><\/h3>\n\n\n\n<p>There are a few ways to have loved ones help you get a loan for real estate. One popular method is to have them co-sign. That way, you share the risk. If things go south, your loved one is liable for the whole loan, which will likely hurt (or kill) your relationship.<\/p>\n\n\n\n<p>Another way is for them just to give\/loan you the money. It\u2019s not the best option because mixing business and family usually doesn\u2019t turn out well. But nonetheless, it is an option.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Yourself<\/strong><\/h3>\n\n\n\n<p>Sometimes you just have to go \u201call in\u201d and pull together any funds you have available. Maybe you take out some of your retirement funds. Or if you have a lot of equity in your home, you can take out a second mortgage and put it towards the rental property.<\/p>\n\n\n\n<p>This isn\u2019t a secure way of doing things, nor is it very creative. But it can be done if you have assets available and are in a position to take the risk.<\/p>\n\n\n\n<p>Keep in mind that you can always use retirement funds for your investment property. <a href=\"http:\/\/www.marketwatch.com\/story\/how-to-buy-real-estate-in-an-ira-2013-04-02\" target=\"_blank\" rel=\"noopener\">This article <\/a>explains how you can actually protect your real estate investment within your IRA, providing some excellent tax advantages.<\/p>\n\n\n\n<p>It\u2019s not exactly the holy grail, though. As <a href=\"http:\/\/www.kiplinger.com\/article\/real-estate\/T032-C000-S002-an-ira-is-a-poor-shelter-for-real-estate.html\" target=\"_blank\" rel=\"noopener\">this article from Kiplinger<\/a> points out, some of the benefits of owning a rental property, such as reducing property taxes or accounting for depreciation, can\u2019t be used if it\u2019s held within an IRA.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"1399\" height=\"916\" src=\"https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2018\/12\/20122903\/Property-Management-Training-.png\" alt=\"Property Management Education\" class=\"wp-image-1295\" srcset=\"https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2018\/12\/20122903\/Property-Management-Training-.png 1399w, https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2018\/12\/20122903\/Property-Management-Training--300x196.png 300w, https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2018\/12\/20122903\/Property-Management-Training--768x503.png 768w, https:\/\/s3.amazonaws.com\/assets.resources.rentpost.com\/wp-content\/uploads\/2018\/12\/20122903\/Property-Management-Training--1024x670.png 1024w\" sizes=\"(max-width: 1399px) 100vw, 1399px\" \/><\/figure><\/div>\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Getting Property Loans Takes Work!<\/h3>\n\n\n\n<p class=\"has-text-align-center\"><em>\u201cThe brick walls are there for a reason. The brick walls are not there to keep us out. The brick walls are there to give us a chance to show how badly we want something. Because the brick walls are there to stop the people who don\u2019t want it badly enough. They\u2019re there to stop the other people.\u201d<\/em> &#8211; Randy Pausch<\/p>\n\n\n\n<p>Unfortunately, there\u2019s no \u201cright\u201d way to do this. But the good news is that you can be creative with financing a home.<\/p>\n\n\n\n<p>Maybe you combine several of the methods above. Or you talk to a seasoned investor who can give you great advice on how to get investment financing from another source.<\/p>\n\n\n\n<p>Either way, just keep in mind that investing does have a learning curve and takes work. But once you get going and become a master of obtaining financing for <a href=\"https:\/\/rentpost.com\/resources\/article\/best-income-properties-new-investors\/\">rental properties<\/a>, the world is your vacant lot to build up.<\/p>\n","protected":false},"author":7,"featured_media":0,"parent":0,"menu_order":0,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"footnotes":""},"manualknowledgebasecat":[45],"manual_kb_tag":[134,135,133,136,125,137],"ppma_author":[365,371],"class_list":["post-954","manual_kb","type-manual_kb","status-publish","format-standard","hentry","manualknowledgebasecat-landlord","manual_kb_tag-fund-sourcing","manual_kb_tag-getting-loans","manual_kb_tag-investment-loans","manual_kb_tag-property-loans","manual_kb_tag-real-estate-investment","manual_kb_tag-rental-investment","author-karina","author-jacob-thomason"],"acf":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/manual_kb\/954","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/manual_kb"}],"about":[{"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/types\/manual_kb"}],"author":[{"embeddable":true,"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/users\/7"}],"version-history":[{"count":17,"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/manual_kb\/954\/revisions"}],"predecessor-version":[{"id":5100,"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/manual_kb\/954\/revisions\/5100"}],"wp:attachment":[{"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/media?parent=954"}],"wp:term":[{"taxonomy":"manualknowledgebasecat","embeddable":true,"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/manualknowledgebasecat?post=954"},{"taxonomy":"manual_kb_tag","embeddable":true,"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/manual_kb_tag?post=954"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/rentpost.com\/resources\/wp-json\/wp\/v2\/ppma_author?post=954"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}