What is a residential investment loan?
- For investment loans, the borrower does not occupy the property but instead uses the property as an investment vehicle to generate income (“non-owner-occupied”).
- The most typical investment scenarios are (1) renting the property out to others; and (2) renovating and reselling the property (“fixing and flipping”).
- To be eligible as a residential investment property, the property can only have 1 to 4 units. (Properties with 5 or more units are considered commercial properties, and different loan terms would apply.)
Success Stories (Residential Investment Loans)
Sample residential investment loan programs
Rental programs: If you intend to be a landlord and use your investment property as a source of rental income, here are typical loan terms:
- Maximum loan amount: Around $2 million (however, if you plan on having a portfolio of multiple rental properties, the maximum loan amount can go as high as $100 million)
- Loan-to-value ratio (LTV): Up to 75% to 80%
- Debt-to-income ratio (DTI): Usually cannot exceed 50%
- Credit score: At least high 500s
- Reserves: 6 to 36 months of reserves to cover expenses
Fix-and-flip programs: If you intend to renovate and resell your investment property, you can apply for a short-term bridge loan to provide the necessary funds. Typical terms include: loan amounts between $150,000 and $25 million, up to 90% of cost, fixed rates, and 12-24 month terms.
Creative ways to qualify: Instead of requiring traditional documents such as tax returns, some lenders may be willing to qualify borrowers based on rental surveys (which are appraisals of typical rental streams in the same geographic area). Other lenders are even willing to forgo requirements regarding DTIs and reserves, and instead will conduct an appraisal to assess the value of the property.
The parameters listed above vary from lender to lender. To learn more about residential investment loan terms, call David A. Krebs at 321-239-2781, click here to submit a message, or click here to book a call.
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