Second Home Loan for a Rental...would you sign this?

[James Gillice]

New investor here with a question on getting a second home loan vs. a private money construction build loan. the reason being that I don't have the money to put down for the private money.

Would you sign this rider (below) for a build-to-rent property knowing that you are only planning to rent it out? What are the ramifications? Will anyone ever know or care?

This option has been presented to me with assurances that many have done the same with no problems. Is this common practice? No big deal? Or should I steer clear?

What is a worst-case scenario?

[James Gillice]

Originally posted by @Patrick Bavaro:

@James Gillice I have done It and the answer I’d give is It depends. When I signed my second home

Rider, I did It through a construction to perm loan on the front end, meaning I signed all closing documents before the build even started and when it’s done It will just convert to a permanent mortgage without having to refi. The second home rider states “1 year from effective date”. So I signed in July, property will be complete around July of next year. I spoke with my REA and he said I would be in the clear according to the verbiage on the rider.

Currently I’m building a 4/3 new build in Cape Coral. Total all in cost is about $265k and I financed It at around 3.6% with 10% down. Rents right now are at about $2300 and climbing. Currently post construction appraisals are coming back at $340k-$410k depending on location of the property. If I play my cards right I will be Anel to do a cash out refi, still cash flow decently and take all my equity out to do it again. I’d be happy to connect to share experiences. Good luck!

This is also for a new build in Cape Coral (through a turnkey company). Seems like a great opportunity, but I'd like to know how you got that financing. Let's connect...I've got a few questions.