One of the first financing types kicked to the sidelines by lenders when the economy started sliding, was long-term residential rental property loans. It’s a difficult proposition for a lender to commit capital for an extended period of time at a fixed interest rate, when there is significant economic uncertainty and declining long-term yields. Additionally, a historically high unemployment rate poses the risk that residential rental property tenants may stop paying rent, thereby triggering property owners to miss loan payments or default on their mortgage altogether. Most investment residential 1 to 4 unit property lenders didn’t close their doors, but instead focused on short-term financing.
Bridge Financing is Still Going Strong
History has shown that during a recession the housing market usually suffers and property values decline. Interestingly, this recession has seen residential 1 to 4 unit property demand increase and property values rise in many markets. The wrath of COVID-19, and the move by many companies to implement temporary or permanent work-from-home policies, has caused millions of city dwellers to reconsider their address. As a result, suburban and even rural markets are seeing nearby urban residents flood into their communities to scoop up homes that may have been sitting at depressed values for months, or even years. Many property investors are seizing the opportunity to purchase or flip residential real estate in markets that are on the rise. Lenders can still earn an above market return providing short-term 6 to 12 month bridge, or fix-and-flip loans in desirable markets, and have continued to lend (under more conservative guidelines) even during this crisis.
Residential Rental Loans Can Now be Found
Not many investment property lenders have resumed making long-term rental loans secured by 1 to 4 unit residential property, but one company is leading the charge. LendingHome, America’s largest hard-money lender which has funded over $5 billion across 23,000 residential projects nationwide, has recently resumed making residential rental property loans. As a technology based online lender, LendingHome has accumulated a massive amount of data which has enabled it to adjust its lending program to account for risk inherent in making long-term loans during a recession. In addition to its bridge and fix-and-flip program which offers rates starting at 7.95%, The firm’s recently relaunched 1 to 4 unit residential property rental program, offers very favorable terms for loans up to $3 million:
- Rates as low as 6.5%
- 3, 5, 7, and 30-year fixed mortgages
- Single-family homes, 2 to 4 unit residential property, and detached PUD (planned unit development homes)
- Individual and entity borrowers are eligible
- Minimum 680 credit score requirement (if your credit core is less than 680, contact Patch of Land)
- Cash-out up to $500,000 after 6 months
- No prepayment penalty after 3 years
- Close in as little as 5 to 15 days
Rental program loan funds can be used to purchase or refinance investment residential property, as well as pull cash out. LendingHome’s online application is quick and easy and applying won’t affect your credit score.
This is a worrisome time for many property investors who are facing higher than usual vacancy rates, ballooning mortgages, or liquidity crunches. However, lenders like LendingHome are not only still offering affordable bridge loans starting at 7.95%, but are also delivering property investors peace of mind with long-term residential rental property loans fixed for up to 30 years with rates starting at 6.5%. As the economy improves and COVID-19 abates, it is likely that other lenders will begin to re-open their rental loan programs and relax lending guidelines.
Don’t hesitate to contact us if you are unsure of which financing option is the right choice for you, or if you need additional lender recommendations beyond those mentioned in this article.