Some Things To Be Aware of When Buying a Student Rental or Refinancing It
Sandra Lastovic Mortgage Freedom Blog: Financing student rentals: lenders see them as “the plague” of properties.
An area of mortgage expertise I focus on is financing and refinancing rental properties. As a rental property owner myself, most clients appreciate the first-hand knowledge on the pros and cons of owning real estate as an investment. I have made some great decisions with real estate and also some bad ones.
- In most cases the finance company will approve the mortgage based on the borrower qualifications. Where I’ve seen problems arise is through the appraisal of the property. Lenders are now conditioning appraisals on almost all conventional mortgage loans. Although you may have been pre-approved or approved for the mortgage loan, the student rental property will be an issue with most traditional mortgage lenders. If you’re buying a new student rental be sure to have the appraisal completed before the financing condition is up. This can save you a lot of last minute problems on the closing day.
- For those mortgage lenders who will finance a student rental, you may be required to put up to 35% as a down payment versus 20% which is typical on a regular residential rental property.
- If you son or daughter will be living in the property while they are going to school, these properties are viewed differently than a student rental property purely for investment purposes. Your mortgage professional should be able to give you advise you on how to structure the mortgage loan to benefit you financially. Also seek the advice of an accountant to discuss the capital gains implications once you sell the property.