Wednesday, February 18, 2009

Revised Fannie Mae Regulations Good for Investors

I just met with my mortgage specialist and he explained that Fannie Mae regulations have been revised to allow lower cost/conforming loans be made more available to qualified investors. This is good news for investors who want to take advantage of the soft sales market to add to their portfolio while housing prices are soft, mortgage rates are low and rents are still creeping up. Housing prices are soft, especially in the price point where we recommend investors buy, mortgage rates are low if you qualify for a conforming loan and we continue to push rents up as vacancy rates drop to a ten year low.

The problem for investors was the government would not allow conforming loans to investors who already had four houses. Sometime this included your primary residence meaning your carrying costs went up significantly if you had three or four investment properties and wanted to add additional investments. Now you can get a conforming loan with a 5%-6% interest rate for up to ten homes. The new criteria includes that the investor must include a 20%-25% down payment. Investors must now re-orient so they should be looking for a strong cash flow instead of hyper leverage. Please call us to assist you in locating a proper investment property. If you can put 20%-25% down on a $140,000 home we will look to place you in a home which will return 5%-10% each year on your down payment over a ten year period. This return is before the impact of appreciation or the principal retirement as your tenant pays the bills. Buy the house now, get cash flow now and cash out at the end of 15 years to realize the benefit of any appreciation and retirement of principal. Once you add the benefits of appreciation and retirement of principal you should be looking to receive a 10%-20% annualized return on your initial investment.

So, if you own less then 10 investment homes you should be looking to take advantage of this current opportunity. Let us know you are interested and we will assign an investor specialist to work with you. We will locate the house which is vetted with an eye towards performance as a rental property and provide funding resources who specialize closing loans for investors.

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