By Noah Brocious – President/RI/Mortgage Loan Originator – When you’re looking to jump into property investment, you have a lot of options, but what type of real estate will afford the most benefits? In today’s housing market, you should consider a multifamily property.
This type of real estate not only has many advantages to offer but can be purchased with apartment building loans from third-party lenders such as Capital Fund 1. With solid financing in your pocket and thorough research, you can turn an empty building into a reliable source of income.
What Are Multi-Family Properties?
Multifamily properties are built to house more than one familial unit. Examples include duplexes, condos, townhouses, and apartment buildings. The important thing is that the structure is designed to accommodate multiple living quarters.
As the owner of a multifamily property, you’re responsible for maintenance and repairs as specified by local ordinances and lease agreements. Many people prefer to hire a property manager to take care of these responsibilities.
What Are the Benefits of Purchasing a Multifamily Property?
Why choose a multifamily property when looking at investment options? This type of real estate offers several benefits you’re sure to appreciate as a new investor. The best part is that it doesn’t matter whether your property is in Oregon or Arizona — these advantages are available no matter the location.
Additional Source of Income
- The most obvious benefit is the rental income. With a 12-month lease, you have a reliable source of income that can fund other investment opportunities or help you pay off your original loan.
- If you’re renting out a multifamily residence, you get more tax breaks than a regular homeowner. Since it’s an income property, you can write off expenses incurred to keep the residence in order. This includes not only maintenance and repairs, but upgrades and renovations.
More Financing Options
- When you’re looking to use a property for investment, you can access commercial property loans, which offer different terms from traditional mortgages. For one, you may be able to access larger amounts; lenders view income property as a solid bet when issuing loans since you’ll have a revenue stream to put toward paying off the debt.
- Additionally, you can access short-term financing. Rather than getting caught in a 30-year agreement, you’ll only be paying for 3 to 5 years, which means your debt-to-income ratio will look favorable if you apply for further financing.
What Are the Benefits of Using Commercial Property Loans?
While you can apply for loans through a traditional financial institution, there are many advantages to pursuing financing through a third-party lender. Specifically, third-party lenders can offer short-term commercial property loans that are better suited for rental properties than a traditional mortgage.
There are several different types of commercial property loans with varying terms and purposes:
New Construction Loans:
- If you’re looking to build a residence from the ground up, this is the perfect financing option.
Buy and Hold Loans:
- This asset-based financing has many different uses.
Flip and Fix Loans:
- This type of financing is specifically designed for investors looking to sell the property after renovations.
- When you need fast cash, a bridge loan is a great choice.
The Benefits of Investment Property Loans
While details may vary between the different types of investment property loans, there are a few benefits that are available across the board.
- One of the best things about commercial real estate loans is flexibility. Many traditional loans only allow you to use funds for a specific reason, which can pose an obstacle if you’re looking to purchase, renovate, and rent a building. For example, what if you purchase a property believing it’s move-in ready, only to find repairs are needed? You’ll be hard-pressed to get another loan so soon after financing if you got a regular mortgage.
- Commercial loans, on the other hand, allow you to reallocate funds as necessary. If you have cash left after closing, it can go toward renovations or repairs; you can even apply for loans with the specific intent of using funds for both purchasing and upgrades.
- A traditional mortgage is an arduous affair that involves lots of paperwork and investigation by underwriters. This can mean waiting around for over a month before knowing if you’re approved. Business deals tend to move quickly, which is why third-party lenders such as Capital Fund 1 aim to provide fast cash. With decisions made as quickly as 24 hours, you don’t have to worry about being left in the lurch.
Relatively Easy Approval
- The approval process for commercial loans also means that individuals who couldn’t qualify for mortgages may be able to get financing. Many of these loans are asset-based, which means lenders are more concerned with the value of the property than they are with your credit history. So if you have less-than-ideal credit or don’t have much history yet, you can still get funded if the building’s value meets loan requirements.
- Typically, lenders will offer LTV ratios between 65% and 75%, depending on the property and loan type. Additionally, they’ll want the property value to cover the insurance, taxes and other costs. These may vary depending on the property’s location; for example, Scottsdale, AZ, and Portland, OR, will have different property taxes.
Good Bargaining Position
- Getting approval quickly isn’t just convenient — it can help you save some money. Buying a property is usually a negotiation, with each side making offers until you come to an agreement. If you can offer cash immediately, a seller may be willing to lower the price in exchange for a quick closing.
Let Capital Fund 1 Help With Your Multiple Family Property Loans
Interested in owning an income property? Capital Fund 1 provides loans for commercial properties in Arizona, Colorado, Texas, and Oregon. We’re proud to offer fast approval and competitive terms on all our financing options. For more information or to submit an application, give us a call at (480) 889-6100 or contact us online.
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