Rental properties are an excellent way to accumulate passive income, but acquiring one of these properties may sometimes be challenging. One option you may have is rental property loans, which give you the money required to purchase a home if you meet specific requirements. We at LMWilliams Funding are private lenders for real estate and are here to teach you more about rental loans! Visit our website for more information.
What Is A Rental Loan?
Rental loans are for individuals who are seeking to purchase a rental property. These investment properties are meant to generate income, usually through renting them out to tenants. This can allow you to create a stream of passive income without outright owning a property.
What Makes This Type of Loan Different?
Since these loans are for rental properties, they are quite different from a conventional home loan. These differences include:
Higher down payment requirements - Up to 20%, but it depends on your credit score.
Higher interest rates - Interest rates on rental loans are typically 100 to 400 basis points higher than a standard property. So if a home loan is 4.5%, a rental loan would be 5.5% or more.
Higher reserve requirements - You may have to prove that you have liquid cash reserves equal to or higher than your down payment since you will be responsible for the home's upkeep.
Other forms of documentation may be required, but we can get that sorted out for you once the process has begun!
Rental Loan Requirements and Good Practices
Before you think about taking out a rental loan, it may be a good idea to assess your current financial standing.
Improve your credit score - The better your score, the less amount you may have to give on your down payment.
Make sure you are financially ready - Save money for your down payment and plan on having 6-12 months of cash reserve. These can all help prevent the loss of your property if anything negative occurs.
Ensure the property is ready to rent - Check if any major repairs are needed since construction tends to be financed separately.
Why Work With Us?
With numerous years of experience, our team keeps quality in mind as we find the most efficient ways to give out loans. We work with most credit types, so there is no need to worry about not qualifying with us.
If you require a team of experienced and trusted private lenders for real estate, look no further than LMWilliamsFunding. Get in touch with us today for more information about our rental loan programs!