Top Six Reasons To Choose an Investor Friendly Lender

Whether you’re a seasoned or aspiring investor, it’s crucial to have a lender (or two, or three) in your corner who understands your investing goals and can help you with creative solutions.

Wait, aren’t all lenders the same?

Absolutely not! There are MANY different types of lenders out there and it is in your best interest to find at least 2 lenders - more is always better in this case - who understand real estate investing.

Don’t all lenders offer the same loans with similar interest rates/terms?

Once again, NOPE! Every lender has unique loan products and you can save BIG by doing your homework. That’s what this post/video is all about - we’ll give you the details on what to look for in an investor-friendly realtor.

First, let’s distinguish between 3 types of real estate financing:

1. Owner occupied primary residence

• This is where you reside

• Lowest risk from a lending perspective

• Lower down payment requirement

• Lower interest rate

2. Non-owner occupied residential investment

• This is a single home or a multiplex with up to 4 units

• Higher risk from a lending perspective because it’s easier to walk away from if things go south

• Higher down payment requirement - usually 20% minimum

• Higher interest rate and points

3. Non-owner occupied commercial investment

• This is a multiplex with 5 or more units or other commercial real estate

• Higher risk from a lending perspective because it’s easier to walk away from if things go south

• Higher down payment requirement - usually 25% minimum

• Higher interest rate and points

While many banks and lenders that typically lend on primary residences will do loans for investment properties, most do not understand the nuances of rental properties. 

Much like traditional realtors who sell homes to first time and upgrading home buyers, residential lenders are not experienced in asking the right questions, digging for the right information, and coming up with creative solutions that their investor-friendly counterparts do on the regular.

This is why you want an investor-friendly realtor like me AND an investor-friendly lender on your team.

What makes a lender “investor-friendly”?

1. LEVERAGE: They understand the use of leverage (borrowing money) to achieve financial benefit - deductions like depreciation, mortgage interest write offs, and higher returns on investment by using OPM (other people’s money) when buying real estate investments

2. LIMITS: They know that borrowers can have up to 10 loans at a time. Other residential lenders may not know that limit and may artificially limit an investor to fewer loans despite being well qualified and owning other cash-flow positive properties.

3. CREATIVITY: They come up with creative solutions to improve your DTI (debt to income) ratio so that you’ll qualify for that next investment loan. An example of a creative solution like this would be having you pay down student loans, car loans, HELOCs, or other debt so that your ratios meet their underwriting requirements. They may also work with your tax advisor to determine how and when to report rental income gains and losses depending on your investment goals.

4. LLCs: Investor-friendly lenders understand why investors use LLCs to keep assets separate and limit personal liability. They might be able to help an investor transfer the property into an LLC without triggering the due on sale clause, which can happen when a property transfers from the original borrower’s name into an LLC.

5. UNIQUE: They have unique loan products that reduce your cash out of pocket. Perhaps you’re buying properties that need renovation and you want to save your cash for those expenses. Finding an investor friendly lender with a lower down payment option helps you preserve cash so you have more to work with on your rehab. 

6. AGGREGATE: Investor-focused lenders can help you aggregate your mortgages to stay under the 10 loan limit. This is done using a blanket mortgage, a portfolio loan, or a private money lender. All of these are creative solutions that traditional lenders may not know about or have the ability to execute. 

Okay, I’m convinced. But how do I find an investor-friendly realtor?

You ask your investor-friendly realtor… ME!

I work with a variety of investor focused lenders that offer all sorts of unique loan products - from non-owner occupied loans requiring only 10% down with no PMI, to lenders who don’t charge points on investment loans and everything in between.  

I send personalized introductions to our vetted lenders so YOU can make the best decision about who to use based on your investing goals.

Another option is to ask your network of other realtors for recommendations. A simple Google search is likely NOT your best bet. 

BiggerPockets might be one source to check out as well for investor-focused lenders in your area or who service multiple states.

Whatever you do, ensure you’ve got a relationship with at least 2 or more lenders who know your goals, your financial situation, and who you trust.

What do you ask them to make sure they’re really investor-focused?

• How many loans can I have with your company?

• What type of loan programs do you offer?

• What is the minimum down payment required?

• Do you consider existing rental income when underwriting a loan?

• Will you work with my tax advisor to help me make the most of my investments?

• What are your reserve requirements?

• Many lenders require a reserve amount of up to 6 months' worth of mortgage payments and operating expenses per property.

• Do you sell the loans or do you hold them on your books?

• Is there a loan minimum or maximum aggregate dollar amount loan limit?

• Can I transfer the property into an LLC?

We are here to help, so email us and we’ll get you connected!