Welcome to Magnolia Design Properties! We are a real estate investment company that specializes in multifamily investing and property acquisition. We often get asked how do you begin in multifamily investing, and a huge concern for most people is the financial aspect of getting into commercial investing. But as educators, we want to let you know what your options are and how you can get involve with multifamily investing a lot sooner than you think!
But before we talk about your options, we have to talk about a really important principal in the world of loans. And that is the concept of Loan to Value or LTV. All loans are capped at a specific percentage of LTV. For example, if a loan is capped at 75% and loan is for $150,000 on a property that’s worth $200,000, you have a loan-to-value of 75% and therefore you have $50,000 as equity. Now that you understand the concept of LTV, lets talk options.
Conventional Mortgage
A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. And they can be obtained through organizations like Lending Tree and Quicken Loans. The terms of a conventional mortgage are between 15 – 30 years. And loans are capped at 80% loan to value. And these loans typically have interest rates between 4% and 6%.
Government-Backed Loan
A government-backed loan is a loan subsidized by the government, which protects lenders against defaults on payments, thus making it a lot easier for lenders to offer potential borrowers lower interest rates. Its primary aim is to make home ownership affordable to lower income households and first-time buyers. The terms are between 5 – 35 years and the LTV is capped at 87%. You can expect interest rates between 3% – 6%.
Portfolio Loan
It is not uncommon that loans are issued by a lender and are then packaged together with other loans and sold in the secondary market. The difference with a portfolio loan is that the lender who initially wrote the loan will keep it as part of their investment portfolio. These loans have terms between as short as 3 years and for as many as 30 years. Their LTV can be up to 97% and their interest rates range from 3.70% – 5.70%.
Short-Term Multifamily Financing
Your last option for multifamily financing is to get a loan that is specifically for short-term multifamily investing. Short-term multifamily financing is a non-permanent multifamily loan option with terms that range from six to 36 months. These loans include both hard money loans and bridge loans with monthly payments that are usually interest-only and can range from 4% to 12%.
Are you new to investing and looking for a way to get involved with multifamily investing? Are you interested in investing in add value properties that happen to be situated in popular housing markets? Magnolia Design Properties is a real estate investment company that is honed in on add value multi family properties in the B and C class and we would love to have you join us in investing! Let us do the heavy lifting of property acquisition, and head over to our contact page and fill out the form so that we can contact you with information about investment opportunities that you can join us in!
