Single Family (1-4 Unit) Properties come in many forms. Those include detached single unit homes, duplexes, triplex, four families, condos, townhouses and more. Typically the lender requires the property be of at least 750 sq ft and used for residential purposes. As investment properties, the units may be leased on Daily or Weekly (AirBnb or VRBO), Month to Month or Annual lease. Residential properties may not be owner occupied.
Private Lender: Fix & Flip/Rent
Private Lenders are the primary funding source for purchase-rehab market. These lenders provide short term loans which include both the funds to purchase or refinance the property, plus funds to renovate the property. A broad range of property types and rehab experience levels are eligible for financing. Financing is available in the form of a Term Loan or Line of Credit.
Pros
- Underwriting Flexibility
- Quick Closing
- Interest-only Payments
- Pricing Based on Experience and less on Credit
Cons
- High Interest Rate
- Higher Fees
- Short Term
- Extension Fees, if more time is needed.
Loan Amount
50K+
Min. Rate
10.75% – 12.99%
Term Length
Up to 1 Year
Closing Time
3 – 4 Weeks
Max LTV
90% LTC
Amort.
Interest Only
Bank / Private Lender: Rental
Banks and Private Lenders are excellent funding sources for long term rental loans. Banks provide low rates and fees for borrowers who have solid credit and can provide tax returns to document they can afford the loan. Bank loans are generally fixed for 5 – 10 years and payments based on a 20-25 year amortization.
Private lenders provide an excellent alternative to bank loans. These loans are based on the cash flow of the property. Additionally, these loans are generally made to a business entity which enables investors to buy large portfolios of properties without the loans appearing on their personal credit reports. These loans generally carry a fixed rate for 3 to 30 yrs.
Pros
- Full Doc / High Quality Loans get Good Rates
- Long Term Fixed Rates Available
- Private Lenders offer Loans based on Property Cash Flow rather that personal income.
- Simpler documentation than Agency Loans
Cons
- Slightly Higher Rates / Fees for Lower Documentation
- Prepayment Penalty
- Requires Minimum FICO of 620+
Loan Amount
50K+
Min. Rate
8.14% – 9.99%
Term Length
3, 5, 7, 10, 30 years
Closing Time
4 – 5 Weeks
Max LTV
80%
Amort.
Up to 30 yrs
Pros
- Underwriting Flexibility
- No Cap on number of loans
- Simpler documentation than Agency Loans
- No Cash Flow requirements
Cons
- Slightly Higher Rates
- Prepayment Penalty
- Slightly Higher Fees
Loan Amount
$75K+
Min. Rate
8.14% – 10.99%
Term Length
3 to 30 years
Closing Time
4 – 5 Weeks
Max LTV
80%
Amort.
Up to 30 yrs
Bank / Private Lender: Blanket Rental
Banks and Private Lenders are able to bundle groups of single family properties into a single loan for investors. These lenders provide 5 to 30 year term loans. These loans either balloon or convert to an adjustable rate loan at the end of the fixed term. Amortization periods are generally 20 to 30 years and some can include an interest only period. Blanket loans have the ability to spread loan fees and expenses over the number of properties in the pool. Additionally, lenders are more willing to include lower value properties in pools.
Pros
- Underwriting Flexibility
- Lower Value properties allowed
- Long Term Fixed Rate Options
- Blend the Property Cash Flows into an overall DCSR.
- No Recourse Options
Cons
- Longer closing
- Upfront Deposit
- Capital Reserve
- Post Close Reporting
Loan Amount
150K+
Min. Rate
7.99% – 8.99%
Term Length
5, 7, 10, 30 Years
Closing Time
6 – 8 Weeks
Max LTV
80%
Amort.
Up to 30 Yrs
Private Lender: Hard Money Bridge
Private Lenders are the primary funding source for Hard Money Loans. Hard Money Loans are often referred to as “Asset Based” Loans where the lender believes there is enough equity in the property to quickly dispose of it if the borrower were to default on the loan. Hard Money Loans are short term loans of 12 – 24 months duration. Lenders generally expect the loan to paid off through the sale of the property or a refinance by another lender. Hard Money loans are very useful when a quick close is required or the borrower is unable to obtain financing from traditional lending sources.
Pros
- Flexible underwriting
- Quick Closing
- Interest only payments
- Up to 2 Yr Term
Cons
- Higher interest rate
- Higher Fees
- Short Term
- Extension Fees, if more time is needed.
Loan Amount
$50K+
Min. Rate
10.99% – 12.99%
Term Length
Up to 2 Yrs
Closing Time
3 – 4 Weeks
Max LTV
75%
Amort.
Interest Only
Bank / Private Lender: New Construction
Banks and Private Lenders have returned to the market as a solid source for new construction financing. These lenders provide short term loans that include both funds to purchase or refinance the land, and funds to construct the home. A broad range of property types are eligible for financing. Finance can come in the form of a Term Loan or Line of Credit.
Pros
- Flexible underwriting
- Quick closing
- Interest only payments
- Fund Land Purchase and Construction
- Lines of Credit or Loans Available
Cons
- Higher interest rate
- Higher Fees
- Short Term
- Extension Fees, if more time is needed.
- Draws paid on completed construction.
Loan Amount
$50K+
Min. Rate
10.00% – 12.99%
Term Length
Up to 2 Yrs
Closing Time
3 – 5 Weeks
Max LTV
90%
Amort.
Interest Only