Interest Only Lenders / Loans for Long Term Rental Investing

[Rich Solano]

I am looking to purchase a few rentals properties on deals that came in through my direct seller marketing. I intend to buy them 10-30% below market value through my LLC.

CoC return on these condos are from 12-15% with a cash flow of anywhere from $3-400 / month if going the traditional financing route. Purchase prices are between 105k-140k.

I am considering doing interest only loans to increase cash flow. Can anyone recommend a lender that they have personally used to implement this strategy? Has anyone utilized this strategy for a longer term and have any feedback? 

[Chris Seveney]

@Rich Solano

Not familiar with any lenders offering interest only. Some hard money lenders will do it for up to 3 years but would need a good down payment but recognize the rate would be double digits

Be interested to hear what others say

[John Clark]

Quote from @Rich Solano:

I am looking to purchase a few rentals properties on deals that came in through my direct seller marketing. I intend to buy them 10-30% below market value through my LLC.

CoC return on these condos are from 12-15% with a cash flow of anywhere from $3-400 / month if going the traditional financing route. Purchase prices are between 105k-140k.

I am considering doing interest only loans to increase cash flow. Can anyone recommend a lender that they have personally used to implement this strategy? Has anyone utilized this strategy for a longer term and have any feedback? 

Your details are too vague because you don’t give your exit strategy and therefore a lender cannot figure his and consequently cannot figure out the interest rate he should charge.


At one point or another, debt has to be repaid. When and how? “Long term” lending doesn’t cut it. Also, are you giving a personal guarantee? I find that those focus the mind.

[Nate Herndon]

Quote from @Rich Solano:

I am looking to purchase a few rentals properties on deals that came in through my direct seller marketing. I intend to buy them 10-30% below market value through my LLC.

CoC return on these condos are from 12-15% with a cash flow of anywhere from $3-400 / month if going the traditional financing route. Purchase prices are between 105k-140k.

I am considering doing interest only loans to increase cash flow. Can anyone recommend a lender that they have personally used to implement this strategy? Has anyone utilized this strategy for a longer term and have any feedback? 

I utilize 5-year, 7-year, and 10-year interest only DSCR loans for clients who are needing to meet a 1.00 DSCR threshold in underwriting and/or want to maximize cash-flow like yourself.

These loans are all 30-year terms. A 10-year interest only, for example, is going to have a fixed rate for 10 years and you will not make principal payments during that period. It is actually a 10/1 ARM, so after the first 10 years the rate will adjust once per year for the remainder of the 30-year term. That adjustable rate is also amortized over a 20-year timeframe for the last 20 years of the 30 year term.

Truth be told, most will refinance their 5/7/10 year IO loan before it ever reaches the adjustable rate period. All that to say, what you desire is out there. Rates are in the 7.5-8.5% range. Feel free to shoot me a message to connect and discuss further. 

[Rich Solano]

Quote from @Nate Herndon:

Quote from @Rich Solano:

I am looking to purchase a few rentals properties on deals that came in through my direct seller marketing. I intend to buy them 10-30% below market value through my LLC.

CoC return on these condos are from 12-15% with a cash flow of anywhere from $3-400 / month if going the traditional financing route. Purchase prices are between 105k-140k.

I am considering doing interest only loans to increase cash flow. Can anyone recommend a lender that they have personally used to implement this strategy? Has anyone utilized this strategy for a longer term and have any feedback? 

I utilize 5-year, 7-year, and 10-year interest only DSCR loans for clients who are needing to meet a 1.00 DSCR threshold in underwriting and/or want to maximize cash-flow like yourself.

These loans are all 30-year terms. A 10-year interest only, for example, is going to have a fixed rate for 10 years and you will not make principal payments during that period. It is actually a 10/1 ARM, so after the first 10 years the rate will adjust once per year for the remainder of the 30-year term. That adjustable rate is also amortized over a 20-year timeframe for the last 20 years of the 30 year term.

Truth be told, most will refinance their 5/7/10 year IO loan before it ever reaches the adjustable rate period. All that to say, what you desire is out there. Rates are in the 7.5-8.5% range. Feel free to shoot me a message to connect and discuss further. 

 Thanks, Nate. Do you have loan minimum amounts. This is helpful.  

[Nate Herndon]

@Rich Solano 

Minimum property value: $75,000

Minimum loan amount: $50,000

[Erik Estrada]

Quote from @Rich Solano:

I am looking to purchase a few rentals properties on deals that came in through my direct seller marketing. I intend to buy them 10-30% below market value through my LLC.

CoC return on these condos are from 12-15% with a cash flow of anywhere from $3-400 / month if going the traditional financing route. Purchase prices are between 105k-140k.

I am considering doing interest only loans to increase cash flow. Can anyone recommend a lender that they have personally used to implement this strategy? Has anyone utilized this strategy for a longer term and have any feedback? 

You can do a 10 year Interest Only Period on a DSCR loan. The rate is typically higher than a normal P&I loan. It could make sense on those scenarios that are tight on the DSCR.

[Mike Klarman]

Interest only on 30 products used to be decent but now for what you save in the interest only period you really pay the price later when that period ends.

If you are getting under value by 30%, then a plain FRM should work fine. Let's say a Condo market value is 200k, and then rent should be 1500/month. If you are getting that Condo for 30% off so at 140k and you will put up 20% so you'll finance 112k which should only have a payment of 1200/month. You do interest only when fixed rate doesn't work per the DSCR requirements. Yours should work fine.

[Vaughn Smith]

@Rich Solano Need to lock those up at deeper discounts shoot for 30% minimum remember market values are still inflated in many cases, if you only buy with a 10% discount and we get a strong market correction you'll be in a tough spot. Also remember with condos cashflow can be a moving target a special assessment can come along and constrict your cashflow without notice

[Charlie Gonzalez]

Hi Rich,

I work for a lender and we allow interest only loans on investment properties with no issues. We specialize in DSCR and other Non-QM programs.

For interest only, it’s a 40 years term. first 10 years would be IO, then it would amortize over the remaining 30 years. Going interest only will allow you to achieve a better debt service ratio too. 

Please reach out and I can pair you up with one of my mortgage brokers and we will close the transactions with me as I’m the lender. I also have various realtor connections if you need one as well. All across the country. 

Hope this all helps!

[Craig Warner]

Quote from @Rich Solano:

I am looking to purchase a few rentals properties on deals that came in through my direct seller marketing. I intend to buy them 10-30% below market value through my LLC.

CoC return on these condos are from 12-15% with a cash flow of anywhere from $3-400 / month if going the traditional financing route. Purchase prices are between 105k-140k.

I am considering doing interest only loans to increase cash flow. Can anyone recommend a lender that they have personally used to implement this strategy? Has anyone utilized this strategy for a longer term and have any feedback? 

Yes to IO DSCR programs. 30 or 40 year terms, an IO period of 10 Years. Minimum loan amount $125000.