A competitive fix and flip industry and a low-inventory new home buyer market has forced many residential home investors to hold their property for rental income instead of selling. Finding fixed rate rental financing has historically not been difficult for conforming and non-conforming borrowers, but locating a 30-year fixed loan with a low interest rate has been tough.
When Plans Change
If it was your idea all along to fix up a single family home or apartment building and rent it out for long-term income, then you may be ahead of the game and have your financing lined up. However, if you’ve had to pivot your plan because you couldn’t sell your flip property for a profit (or at all), then locating the right loan product might be causing you to panic. Don’t worry, there is permanent, low rate financing available for borrowers with a variety of experience levels and credit scores.
Capitalize on Lower Rates Now
There will always be the chance to buy real estate at a discount somewhere, fix it up, and sell it for a profit—but locking in a low, 30-year fixed interest rate for your rental property now, will pay off in spades down the road. Securing a low fixed interest rate will enable you to earn more income as rental prices increase over time, and pay less mortgage interest resulting in a greater profit when you do sell down the road.
What to Look for in a Lender
When choosing an investment residential lender, don’t just focus on 30-year fixed financing but securing the most favorable overall terms to maximize returns. Look for competitive interest rates and flexible loan programs that fit your investment strategy, whether fix-and-flip or long-term rental. Favor lenders offering reasonable loan-to-value ratios, transparent fees, and manageable closing costs. Consider repayment flexibility, including prepayment options without heavy penalties. Speed and efficiency in processing are also vital, as timely financing can help capture opportunities in competitive markets. Finally, prioritize lenders with strong customer service and a proven track record of supporting real estate investors.
Conclusion
Fixing up and flipping an investment residential property is an appealing prospect, but in a crowded market, it’s smart to consider securing low interest rate 30-year fixed financing and generating rental income instead. Whether you are about to start your investment residential project or are looking for better financing for an existing project, aligning yourself with an experienced lender that offers long-term fixed mortgage products can be a good strategy.