A Special Opportunity for New Real Estate Investors
Updated: Feb 28
The beginning of the real estate investing journey is typically about building equity rather than providing significant cash flow. This is due to the need or desire to use a bank mortgage to pay for a significant portion of the property. Most people assume that they can use a 30-year fixed rate mortgage to purchase rental properties since this is the most common financing product used on personal residences. After discussing financing options with banks most investors are actually left with the options of an adjustable rate mortgage, 15 year fixed rate mortgage, or at best a 20 year fixed rate mortgage.
The reason for the lack of 30 year fixed rate mortgages actually makes a lot of sense. Who in the world would want to loan money at a low interest rate that might not be paid back for 30 years! Enter everybody’s favorite relative, Uncle Sam. The US Government has been willing to purchase 30 year loans originated by banks for years in order to encourage home ownership.
If you know the right banks to work with it turns out that the US Government will essentially extend this program to an individual not only for their primary residence, but for as many as 10 mortgages! Apparently, the new American Dream is not becoming a home owner but rather a small portfolio real estate mogul.
The most important detail to keep in mind is that the rules of this program only allow an individual with 9 mortgages or less to qualify. If you have too many mortgages, even if they are not part of this government program, then you will not be able to take part of this beneficial financing program.
Since the order of mortgages is essential, I would encourage everyone looking to build a significant investment portfolio to use this for their first 10 properties. It will provide your future portfolio reliable cash flow that can be used when you are inevitably hit with a round of unexpected expenses.
Below is an example of the difference in cash flow between the same property placed on a 20 year fixed mortgage or a 30 year fixed mortgage.
As you can see from above, the same property on a 30 year mortgage versus a 20 year mortgage will provide about $1,600/year more in cash flow. If this is repeated over 10 properties then this is a large amount of money that can be used for savings, reinvestment, etc.
The Wichita real estate market is already one of the best for investment properties that provide cash flow. If you are eligible for these 30 year fixed rate mortgages then the combination is an effective base that can help propel anybody into the position of a substantial real estate portfolio owner. There are some important nuances to this program and the strategy that will optimize the benefits so please reach out if you are interested in pursuing this strategy.
To discuss this opportunity further, e-mail us at email@example.com.