www.rentalincomeadvisors.com Rental Financing: Comparison of 8 Strategies

Interest Rates Pros Cons Down Payment Typical Term How to Find Common With Considerations (@2020)

Sellers prefer cash offers Requires large upfront investment Buy & Hold Cash 100% N/A N/A N/A Cashout refi is always possible later Faster & cheaper Lower returns BRRRR (for the initial Buy)

National Banks Conventional Mortgage Favorable loan terms, rate, & fees Stringent qualification standards 30, 20, or 15-year fixed Buy & Hold Max 10 loans (or 20 with spouse) Minimum 20% required Low (3-5%) Regional Banks Widely available (Fannie/Freddie) 7/1 or 5/1 adjustable rate BRRRR (for the Refinance) Not available for LLC-owned ("Golden Tickets") Credit Unions

Non-conforming 30-year fixed options available Less widely available 30, 20, or 15-year fixed Specialty lenders (i.e. Angel Oak) Buy & Hold May have less favorable terms, including Minimum 20% required Medium (5-8%) Rental Mortgage Easier to qualify than conventional Higher rates & fees 7/1 or 5/1 adjustable rate Online lenders (i.e. LendingHome) BRRRR (for the Refinance) prepayment penalties

National Banks Low down payment 30, 20, or 15-year fixed hacking Must live in the property to qualify FHA Loan Must occupy the property Minimum 3.5% Low (2-4%) Regional Banks Easier to qualify than conventional 7/1 or 5/1 adjustable rate Live-in flip Only 1 FHA loan at a time Credit Unions

Quick close Only good for property rehabs Usually short-term (6-18 months) 6-18 months with balloon payment Online lenders (i.e. LendingHome) Fix & Flip Hard Money Loan Asset-backed (no credit/income Usually at least 10% High (8-15%) Must have a guaranteed way to High interest rates & fees due at end of term networking groups BRRRR (for the initial Buy) requirements) refinance into a conventional mortgage

Personal negotiation Terms may be less favorable Personal network Doing business with friends & close family Private Loan Varies Varies Varies Varies Trusted partner Risk to relationships if deals go bad Online networking carries risks

Fixed or adjustable rate with 30-year Rental Portfolio Loan One loan for multiple properties Higher rates & fees Requires an LLC Usuallly max of 75% LTV Medium (5-8%) amortization; balloon payment due after Specialty lenders (i.e. CoreVest) Buy & Hold at scale Frees up conventional mortgage "slots" Usually have balloon payments Balloon payments create significant risk (aka ) 5 or 10 years

Seller Financing Easier to qualify Only available if seller is willing Fixed rate with 30-year amortization; Must find sellers open to this Typically 10-20% Typically Medium (5-8%) Buy & Hold Balloon payments create significant risk (aka Owner Financing) Potentially lower down payment Usually have balloon payments balloon payment due after 2-5 years Work with a local agent