Income and Building Wealth
House flipping can generate substantial income; buying to own and rent can build real wealth as property values appreciate. At some point, experienced flippers begin to think about investing for the rental income stream and appreciation.
Many real estate investors do both. Then, the decisions about what to flip and what to keep begin, factoring in the property type, comparable homes in the area, projected upkeep expenses, and projected appreciation. Most rental property investors develop a formulaic approach and refine it as they gain experience.
No matter how long you have been investing, Residential Capital Partners has the experience, stability and resources to be your financial partner every step of the way. We measure our success in terms of your success.
Bridge Rental Loans
As with fix-and-flip loans, fast funding is essential for bridge rental loans, which share some characteristics with both fix-and-flip loans and long-term rental property loans:
- Single-family residences
- 2 – 4-unit family residential properties
- Townhomes and condominiums
- $50,000 – $5,000,000
- No money down
- 100% financing up to 70% LTV
- 9.9% interest rate on principal
- $700 appraisal and processing fee
- $1,000 document preparation fee
- 3-point origination fee
- 6-month loan term
- No prepayment penalties
- Loans to business entities, no individuals
The ResCap bridge rental loan is a valuable tool used by our customers to close fast on single-family rental properties so that they can build a rental payment history and “season the property.” The seasoning of a rental property helps our customers achieve more favorable interest rates on their long-term rental loans.
Investment Property Loans vs. Home Mortgages
Buying an investment property with a conventional loan is, in some ways, similar to financing your primary residence. The documentation is the same – credit check, paycheck stubs, tax returns, bank statements, W2s and 1099s, for example.
But there are some important differences, too. You will need a higher credit score, interest rates may be a touch higher, your down payment may be larger, and approval may take a little longer. The reason is risk: There is more risk for all parties in long-term investment property loans than for home mortgages associated with a primary residence.
Borrowers must be prepared to cover the loan payments whether the house is rented or not. Lenders have the added risk of a borrower being forced to choose between paying the mortgage on their rental property or their primary residence if they get in a financial bind. Most borrowers will choose to make their primary residence payment and keep the roof over their head.
These differences often surprise first-time rental property buyers. Thorough research helps people seeking investment property loans understand the demands of the investment property loan underwriting process.