If you’ve been considering getting into the rewarding and profitable world of multifamily renting or lending, it’s always best to do your research before making a commitment. While you may think you already know everything there is to know about the process after a brief search, there’s probably a few key facts you missed out on. Take a look at these eight key details about multifamily financing and how they can make or break your investment.
Get a Head Start
If you’ve had any sort of investor ever before, you already know that it’s always foolish to leave important work for the last minute. As is the case with applying for any type of financial assistance from a bank or other lending institution, there are bumps and other issues that seem to exist simply to slow you down. While you can expedite the process by having all your paperwork and information ready before approaching your underwriter, it’s best to get started on the process early just in case.
Explore Your Options
Just because you’ve dealt with a particular type of loan before doesn’t make it the best choice for this venture. When it comes to multifamily financing, you actually have many options to choose from, including bank loans, credit unions, life insurance companies and many, many others.
Be aware that when your underwriter makes the terms for your loan and repayments, they’re acting conservatively in order to minimize the risk taken by the lending agency throughout your endeavor.
Location is Crucial
Location is imperative any time you’re dealing with real estate. How far out in the country is your property? Is it more urban, perhaps? What city is it located in? These are all factors that contribute hugely to your loan-to-value ratio, and therefore to the terms of your loan.
Balancing the Rent
Your loan terms will change regarding the type of tenant you have. Be aware of whether you’re offering government subsidized housing or if you’re focusing on market price.
Locking Down Interest
The best time to lock your interest rate is right after you’re approved. You never have warning about where the market’s going to go, so locking it at a rate you can deal with is a must.
Be sure to select the loan with payment terms that match your investment strategy to prevent yourself from accumulating payment penalties along your journey.
There will be rules governing how much you can take out for the property based on the worth of the property itself. The max tends to be around eighty percent.
Keep all of these facts in mind before approaching your lending institution about multifamily financing to make the most of your investment.