The Best Real Estate Loans You DON’T Know About

These investment property loans can get you a 4% interest rate, a lower monthly payment, or require very little cash at closing. They’re still available in 2025, but most real estate investors are unaware of them. We’ve used these exact strategies on our rental properties in the past, and with rates trending lower, this could be an even better time to take advantage. We’re giving you the full details in this 2025 rental property financing guide! Low credit score or high debt-to-income? You can still invest, but you’ll need to do it wisely. Jeff Welgan is here to help. Jeff is one of our trusted investor-friendly lenders, meaning he’s used to working with rental property investors, not your standard homebuyer who buys a house every thirty years. Jeff is on the inside of the mortgage industry, meaning he knows loans that beginner investors rarely ever hear about. Today, we’re talking about the real estate loans you wish you knew about, mortgage rate predictions and how low interest rates could go by the end of 2025 (Dave and Jeff even place a bet on it), the best beginner loans with little money down, and a sneaky way to snag a 4% interest rate while waiting for rates to get lower. See Jeff and Dave live at BPCON2025! In This Episode We Cover A lower monthly mortgage option most investors have no clue about The one rental property type that investors can get a 4% interest rate on Low credit score? Here’s how to get a mortgage even if you’re in the 500s How much money to put down on your first or next rental (and what it does to your rate) Best beginner real estate investing loans (and how to get 100% financing) Interest rate predictions and where Dave and Jeff think rates will be heading And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/real-estate-1163 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[email protected]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Dave Meyer?

  To buy rental properties, you need money. That's just the way it is, but it doesn't have to be your money. And that's why almost all of us get mortgages and loans to grow our real estate portfolios. But what if you only have limited savings, a poor credit score, an existing mortgage, or high debt to income? Can you still finance your first or next rental? The answer is absolutely yes. Today, I'm sharing the many ways that you can get financing for your investment property, no matter what situation you're in, or the money you have in the bank. Plus, I'll even share a little trick that allows you to improve your cash flow. And this is a strategy I just used on my most recent purchase, 15 years into my investing career, and you can use it too.

• 0:50Dave Meyer?

  Hey, everyone. I'm Dave Meyer, Head of Real Estate Investing at BiggerPockets. I've been buying rental properties for more than 15 years. And on this podcast, we help you achieve financial freedom with real estate. Today on the show, we're joined by Jeff Welgen. Jeff is a lender based in Los Angeles who specializes in working with real estate investors. Jeff was last on the show in April 2024, but the housing market is in a very different place now from where it was a year and a half ago. And as an investor, that means you need to adjust your strategy when it comes to leverage and financing. So Jeff is going to tell us about some options you may not have heard about that may be the difference between making a deal pencil and walking away. Jeff, welcome back to the BiggerPockets podcast.

• 1:35Dave Meyer?

  Thanks for being here.

• 1:36Speaker 01

  Yeah, thanks for having me back, Dave.

• 1:37Dave Meyer?

  It's a pleasure to have you here. Well, this is a really interesting time to look for financing in the housing market. So maybe you could just start by giving us an overview of the landscape for financing right now.

• 1:49Speaker 01

  I'll tell you, a lot has changed since last time I was on, and it's been a fast few years. So the total mortgage market is, the landscape has been changing quite a bit. And so, you know, just recently, in the past week or so, we've seen rates come down pretty significantly with everything that's been going on. And over the course of the past year or so, we've seen some programs open back up that have been great for real estate investors.

• 2:14Dave Meyer?

  So let's just start with the challenges. Is it just rates right now? Is that what's basically slowing people down? Or are people having trouble qualifying? Or is it just, you know, the mortgage rates are just too high?

• 2:23Speaker 01

  It's a great question. I mean, there are some strategies that we are using to beat these high rates, but it is causing a lot of investors to wait it out on the sidelines. But what we've seen here this year, and I know you've talked quite a bit about it, is we've seen property values coming down in some markets, which has really helped the numbers work a little better for a lot of our investors. And so when we're looking at particular programs and strategies to beat these high rates, there's a couple in particular that we're doing a lot of nowadays. One of them is a 30-year fix with a 10-year interest-only option that allows investors basically to make an interest-only payment. So with this program, it's a true 30-year fixed, so it's advertised over 30 years, but for the first 10 years, you have the ability to make an interest-only payment. And so it's good for

• 3:08Speaker 01

  two different reasons. The first one is if your goal is to maximize cash flow, you can just make the minimum payment and do the interest-only payment for the first 10 years, and you can obviously increase your cash flow that way. The other alternative, and where a lot of investors utilize this program, why they like it so much, is because it gives you the ability to manage your cash flow and actually look at it more of as a cash flow management tool, where that first 10-year period, you have the ability to either make an interest-only payment or a principal and interest payment. So let's just say if you are making the principal and interest payment every month, and you have a tenant or two that moves out, or a capital expenditure, you have the ability of making an interest-only payment without being late. Where on a 30-year fixed principal and interest loan, you don't

• 3:53Speaker 01

  have that same ability. You have to continue to make that full payment, or else you fall behind.

• 3:57Dave Meyer?

  And I want to dig into this, because this might be a great option for a lot of our listeners here. I do want to take a step back, though, and just kind of explain some of the elements of what we're talking about here. In a traditional mortgage, when you go out and apply for a conventional 30-year fixed mortgage, there's something called an amortization schedule. And an amortization schedule basically just details how much of your payment goes towards principal each month, and how much goes towards interest. And I know the payment stays the same every single month, but actually, what's going on behind the scenes in those mortgage payments changes. Beginning of a traditional mortgage, you're actually paying a lot more interest than principal. And as an investor, we want to pay down principal.

• 4:41Dave Meyer?

  That's what gets us that loan pay down. That's paying off your mortgage so you owe the bank less money every month. When you're paying interest, of course, that's an important part of a loan, but it doesn't really help you at all. All it is, is the bank's profit. And so traditionally, what you look at and what you want is to pay down that principal. But what Jeff's saying here is that there are new loan products out there where instead of paying any principal at all, all you do is pay that interest for the first 10 years. So Jeff, if what as investors, we want to pay down principal, why would an interest-only loan for the first 10 years of a mortgage be beneficial?

• 5:18Speaker 01

  Depends on what your primary objective is. I mean, if the objective is to maximize cash flow, this tool allows you to do that. I don't recommend just making the interest-only payment for the life of the loan because if you, let's say, the full 30 years, you have a 10-year interest-only period there. If you're only making that interest-only payment, at the end of the 10 years, it's basically for all intents and purposes, going to turn into a 20-year fixed principal and interest loan and that payment's going to go up at that point. So this is a consideration where, you know, with rates being as high as they are right now and with how difficult and challenging it is to get the math-to-math on a lot of deals that we're looking at, this is a useful tool to help in the short term with the goal eventually of refinancing the loan before that interest-only period's up.

• 6:01Speaker 01

  And it also, like I mentioned, gives that flexibility to where you don't have to just make the interest-only payment. You have the option of paying more and anything that you apply up and above that interest-only payment is going to go toward principal, but you don't have to only make the principal and interest payment. It gives you that cash flow management, the ability to make a decision on, you know, what your primary objective is going to be when you're running deal analysis and you're looking at your pro formas.

• 6:27Dave Meyer?

  And so the trade-off here for everyone, just to make clear, is that if you do an interest-only option, you're going to have better cash flow because you're not paying that principal part of the payment. But the trade-off there is then you still, at the end of 10 years, assuming, like Jeff said, assuming you never To make the principal payment, you still owe the bank the same amount of money. And so you're not building the same amount of equity at that time. But as Jeff said, I mean, Jeff, I haven't actually heard of that where you do this option. That seems like the best of both worlds where if you need, you know, a couple of months, you need the cash. You just choose to do interest only. And normally, if things are going well, then you might want to just pay down that principal. Is this becoming a popular option among investors?

• 7:08Speaker 01

  We're doing a lot of them. Yeah, and it's not necessarily a new program. This is one that we used to do years ago, but it's just it's now we're doing a lot more of them, given where the market currently is, because the rate difference on these is only about an eighth difference from a 30-year fix. So you take about an eighth higher to rate, but then you have this flexibility and have the option to do this. So it's just becoming more prevalent and more and more investors are doing it while rates are staying elevated.

• 7:32Dave Meyer?

  I'm just trying to think of a strategy here because I personally don't know if I would buy a deal where the cash flow only worked if you were paying interest only. To me, that seems like a kind of a thin deal, but it's the idea here that maybe it gets you interest-only payments for a couple of years while you stabilize the property or you get rents up or you do a renovation and sort of you lower your monthly costs while you're stabilizing. And then hopefully you can start making those principal payments.

• 8:02Speaker 01

  That's it. Or while we're waiting for rates to come down. This is just one of the creative solutions, kind of like the rate buy down strategies that you've seen over the last few years where we're buying the rate down through a seller credit. We're building into the offers and then the 2-1 buy down option that I know you guys have talked about before. These are the same kind of creative strategies that we're using to beat these higher rates while they stay elevated. And really, the goal with this is to buy time between now and when rates eventually do come down.

• 8:30Dave Meyer?

  Okay. And yeah, I mean, you seem very confident rates are going to come down.

• 8:34Speaker 01

  Yeah, I read your article here recently and I agree with you. I mean, I think that rates have the potential of staying elevated for a little bit longer here. But I think looking at the way that we're headed, the direction that we're headed, you know, keeping politics out of this with the current administration, with the, all of the information that they're putting out as far as trying to unfreeze the housing market and the direction that we're headed as a country right now, I think there's a lot of momentum going into the tail end of this year where we should theoretically start seeing lower rates. I'm a little more bullish and a little more optimistic than you are, but just barely. I mean, I think we're going to land probably somewhere in the low sixes. And, you know, looking at it, you know, objectively, and I think there's a good argument for it. But I also think, you know, I read, like I said, I read your article.

• 9:18Speaker 01

  I think we, uh, there's also an equally, you know, a solid argument that we may see an uptick in inflation here in a bit with tariffs. And that may cause some, you know, the rates to stay a little bit higher for the foreseeable future. So we'll see what happens.

• 9:32Dave Meyer?

  We shall see. My whole point in this article, I, I said that I think we're going to remain around the mid sixes for the rest of the year. I don't think it's going to change that much. I could be wrong, you know, there's so much going on, but that, that's my highest probability outcome. My point in this is no one knows. And so you, you want to make your investing decisions based on the numbers you have today. And so like, I like that this particular mortgage option gives you flexibility. That, that to me is pretty cool. Are there any other creative loan products people are using right now to navigate what are really, you know, relatively high rates compared to where we've been?

• 10:08Speaker 01

  I think there's a good argument for utilizing programs like this with a 10-year interest only, along with some other programs like the ARM products, you know? So that's another one that we've been doing quite a few of. It's important to, to know that, you know, with these adjustable rate mortgages, they're more and more prevalent nowadays. These are the same programs that caused a lot of the issues in the past. And, you know, I mean, you know, coming out of 2008, this caused a lot of issues, but it doesn't mean that that's going to happen again. I mean, these programs are a lot different than they used to be. And if, I think it's if you can find a rate on these that is low enough here to where it offsets the risk difference, the longer term risk versus a 30-year fixed, there is, uh, you know, there are a strong case for taking out an adjustable rate mortgage with lower rates potentially on the horizon.

• 10:54Dave Meyer?

  I did it. I, uh, first time ever.

• 10:56Speaker 01

  Taking a few too, so yeah.

• 10:58Dave Meyer?

  I was able to get a 52571 arm because part of that, half a point of that is because I have a relationship with a bank. It's through where I have my stock portfolio. And if this is actually something great you could do if you happen to have a stock portfolio, places like Fidelity or Charles Schwab will give you a discount if you keep your stock portfolio with them. So, but even without that relationship, it would have been 575. And like you said, you know, it was going to be seven otherwise. And there's risk in that, but I like the idea. A 71 arm, that means I have seven years to figure out, you know, a different financing option if I need it. And even after that, the increases are capped at half a point increases.

• 11:42Dave Meyer?

  And so essentially that gives me three rate increases until, you know, until I would have been at my normal rate anyway. So that gives me 10 years essentially to figure out what I'm going to do. And there is risk in that, but for me personally, I felt like it was worth it. If you do it, just be aware that there is risk and you should probably have some plan to refinance it, especially if rates do come down.

• 12:07Speaker 01

  Absolutely. Yeah. And to what you said, for full transparency, man, like the loan that you were able to get through your bank, check with, you know, local credit unions and regional banks. They're there offering some great ARM products. And I always try to give everybody solid advice, even if it means that we're not doing the loan. There are some great ARM products out there. My only advice would be is if, you know, when you're looking at credit unions or regional banks like you went with, if you don't fit in their box, you better have a plan B and an alternative ready to go because it is a much stricter underwrite typically. When, you know, you're going with some of these credit unions than it is with a broker or direct lenders. So only caveat to that, but yeah, that was great advice.

• 12:48Dave Meyer?

  So Jeff, I want to ask you about another strategy I've been personally considering, but we do have to take a quick break. We'll be right back. You know that thing where you discover a feature you wish your software had? And it turns out it already exists, just on a different platform. Like, oh, you want rent payments processed in two days? Rent Ready does it. Oh, you want to block tenants from making partial payments mid eviction? Rent Ready does that, too. Oh, you want full accounting and tax-ready reports without paying for a second tier? Rent Ready does it. And oh, you want tenant screening that doesn't overcharge your applicants? Rent Ready also does this. Basically, if you've ever complained out loud about your property management software,

• 13:32Dave Meyer?

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• 14:12Dave Meyer?

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• 14:36Henry Washington?

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• 15:16Henry Washington?

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• 15:39Dave Meyer?

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• 16:25Dave Meyer?

  Welcome back to the BiggerPockets Podcast. I'm here with lender Jeff Wilgan. We're talking about different ways that investors are navigating high interest rates. We've talked about creative loan products like the interest only option Jeff shared with us, adjustable rate mortgages. I wanted to ask you about just putting more money down. Like, is that working right now? Because of course it's different for everyone. You know, some people are still getting started, trying to figure out how to get 5% or 10% down. For those who are a little bit more advanced in their investing career, maybe have some more capital saved up. Like, should they consider putting 25, 30, maybe even more down just to make things cash flow?

• 17:04Speaker 01

  Yeah, absolutely. And it really just comes down to what your primary objective is. If it's to preserve capital and scale as quickly as possible, you know, the lower down payment options are going to be your best direction. And so for our clients that have limited capital and are trying to buy as many properties as quickly as possible, then we typically advise some of, you know, anywhere between 15% and 20% down. 10% on short-term rentals. For our clients that don't have the same capital constraints and have more money to work with, when you put 20 or 25 or even 30% down, that's going to maximize cash flow. I mean, you're going to get a much better rate, lower cost options open up. And we've seen, you know, on the DSCR and the conventional side, rates improved significantly at that level between about 20 and 30% down.

• 17:49Speaker 01

  On the higher end, you know, at 15% and even 10%, the rates have stayed relatively high in comparison.

• 17:54Dave Meyer?

  Yeah, that that makes a lot of sense to me. And the other benefit I've been thinking about, and this is just a different approach, but something I've been thinking about is like, if I go out and buy a rental property right now, I'm just going to use round numbers to make this easy. Let's say I buy a fourplex for $400,000 and I put 50% down. So I take $200,000 and I put that in. That would make almost any deal cash flow right now if you put 50% down, right? Then if rates do come down, and I, you know, I'm making an argument that they're probably going to stay the same for this year. I think at some point they'll probably come down. So if at some point they do come down, two things will happen. One, I'll have the option to refinance and I could take that down to 25%. And so I could pull half of my equity out and I'll have another $100,000 to buy

• 18:39Dave Meyer?

  at a time where rates are lower. So it's going to be more advantageous for me to buy. And so it's almost like this combination of like buying a rental property and a little bit of a savings account at the same time that allows you to essentially earn your mortgage rate. Because if you put that equity in, you're not paying 7% on that second $100,000. And so you're in essence earning that every single month. So you're saving extra money and that will get put you in a position to buy more deals later on if rates get better and buying conditions can do it.

• 19:11Speaker 01

  Creative way of looking at it. Yeah, no, I love that. That's a great idea. And you know, thinking about it too, looking later down the road, you know, when rates do eventually come down, fingers crossed, the money to take it back out, even with the cash out hit, in theory, should be a lot less than what you'd be paying, you know, upfront. So yeah, no, I love it. Great strategy.

• 19:28Dave Meyer?

  I mean, it's not for everyone, but it's just something to consider. And I know the logic in the real estate investing community for the last decade has been just like leverage, leverage, leverage. That did make sense for a lot of time. You know, when property prices were going up or rates are going up, taking out max leverage did make sense, but we're just in a different era right now. And we've got to get a little bit more creative, as Jeff has said. So Jeff, talk to me a little bit about the other side of the equation. Cause I just said, you know, people are a little bit further in their career, you know, maybe put more money down. What about for people just getting started? Are there any particular considerations they should be thinking through right now?

• 20:04Speaker 01

  Yeah, I mean, it's the same strategies apply on the primary residence side. So if you're, you know, just getting started, the easiest way to get your foot in the door is to do, you know, a very low down or even a no down payment option as a primary residence. Then you can live in it for a year and then buy your next one. And this is the way that most investors get started is by buying that primary and doing the primary residence move up and buying a new one every year. I have one client that's done this eight times over the last 10, 11 years. Yeah. And I finally got married and this wife put a new wife put her foot down and they're not moving anymore, but it's a great way to scale slowly and, you know, minimize the capital requirement in each one. And, you know, again, politics aside, but the down payment assistance programs

• 20:48Speaker 01

  that the Biden administration rolled out are still available. So they are trailing into the current administration. We have seen a shift where some of the, you know, quote unquote, free money they were giving away is no longer being funded, but the down payment assistance programs nationwide for primary residences are still available to where we can do up to 101% financing, up to two units on primary residences. So one to two, you don't have to put anything down. And then there are programs throughout the U.S. in different parts of the U.S. depending on the state and county, because everybody's a little different. That can go all the way up to 105% financing. So for any of the people listening that don't necessarily have a down payment or have very limited money, don't let that stop you. Start the conversation as early as possible.

• 21:31Speaker 01

  Put a plan together because you're going to find out it's not as difficult as you think. I mean, it may seem like, you know, the barrier to entry is a mile high, but it's, it's not once you start that conversation and figure out what your options are.

• 21:42Dave Meyer?

  Yeah, I think a lot of folks just assume that you have to put 20% down, especially in your primary residence. I was talking to a friend of mine who was just going out trying to buy his first home. And I was like, you might qualify for this down payment assistance program. Like this was in Colorado where I just know the laws a little bit better. But these down payment assistance programs, tax incentives, they exist in most states, most municipalities. As Jeff just said, there are some federal assistance programs. You gotta get creative, especially when you're first getting started. Like this is the job. This is the whole point, you know, this is the job of being an investor. Like go out and find the way that you can make this work for yourself. There's literally programs designed to help you do this. You would be crazy not to go and consider every single one of them.

• 22:26Speaker 01

  Yeah, and ask a lot of questions. I mean, you really have to, my best advice, take that mindset of there is no stupid questions into everything that you do and just, you know, keep researching, ask questions and get plan put together. I mean, the sooner the better when you're just getting started, even as you're starting to build your business and scale up. I mean, you've got to have a solid plan in place.

• 22:46Dave Meyer?

  Jeff, what about for people who may not have great credit? Do, do these programs still apply?

• 22:51Speaker 01

  They do. Yeah. So that's a great question. So on the FHA side, I mean, we can go down to a 500 credit score with 10% down. So even if you have a credit score down to 500, it's still doable as long as you have a down payment. On the three and a half percent downside, we can go down to a 580. All of the down payment assistance programs started about 620 to 660. And then a lot of times there's a lot of ways to help our clients get their credit score up pretty quickly too. So even if you have a lower credit score, again, the sooner you can start the conversation and figure out what the options are that are available. And, you know, if you need to clean up your credit, getting a plan in place and start moving toward that direction, the faster you're going to get into a house.

• 23:31Dave Meyer?

  Okay, that's great advice because I get that question a lot. Like folks who have bad credit, they're trying to figure it out. That's a helpful benchmark, you know, maybe 580 at the low end. But it sounds like, you know, if you want to take advantage of these down payment assistance programs, which I assume you would, maybe shoot for at least 620 seems like a good benchmark. And if you're below that, maybe work on some of the credit repair options Jeff was mentioning. We have some resources on biggerpockets.com that you can check out there as well. If you're looking to repair your credit, definitely something worthwhile. If you're considering being an investor, it will help you in a lot of ways to work on that upfront.

• 24:07Speaker 01

  Save you a lot of money, too.

• 24:08Dave Meyer?

  Next question, Jeff. Another popular thing that's going on right now is these rate buy downs. You talked about that a little bit earlier. Well, just explain to everyone what a rate buy down is and who it benefits.

• 24:17Speaker 01

  Okay, yeah, no, great question. And this is what a lot of the builders are doing. So like when you see builders offering these low rates, they're using a credit through the cost of the property of the home to buy the rate down. And so when we're utilizing seller credits, this has been one of the primary strategies that we have done over the last few years to beat these higher rates where you can build in into the offer up to, in most cases, a 6% seller credit. And we can utilize that seller credit to buy the rate down to help with your cash on cash return and your cash flow. And so basically it is the way that we approach this is one of two ways. You either go in at the time of acquisition or the time of purchase

• 24:59Speaker 01

  when you're submitting the offer and build in that seller credit at that point into the offer. Or if there's issues with the inspection, when that comes back, you can go back and actually ask for a seller credit to be applied toward those repairs that need to be made, and then we can apply that toward the rate buy down. So that's one approach. So if you're buying a place that's $500,000, you can build in up to a $30,000 seller credit that we can use to cover closing costs and buy down the rate. The same thing applies to when you're buying a new build, when you, you know, you hear that you can buy the rate down into the fives or even the fours in some cases, that's being built into the cost of the property that you're buying. And so this is one of the strategies

• 25:41Speaker 01

  that we use a lot with builders that we work with, and we actually were partnered with Rent to Retirement. We do a lot of those rate buy downs with Rent to Retirement. And as of right now, you know, utilizing those credits, we're able to get the rate down on that 10-year interest, only 30-year fix that I mentioned, down to a five and a half. So, I mean, you can imagine what that's doing to cash flow and return. And so that's one way that we're applying this. And then the other strategy that we're utilizing is a 2-1 buy down, where using that same credit that we build into the offer, if it's a, you know, existing property, or through the builder, if it's a new build, we use that credit to buy the rate down and do a step up program. So for the first year, you're getting a payment

• 26:22Speaker 01

  that's based off of a 4.625 rate. Then it goes up to 5.625 the next year. The third year, it goes up to the note rate of 6.625. So there's two different approaches there, both intended to, obviously, maximize cash flow and cash on cash return, and then buy us time while we're waiting for rates to come down to refinance.

• 26:42Dave Meyer?

  Yeah, I think this is one of the most underrated strategies right now, because these things are available. And I feel like being in a buyer's market like we are, and not in every market, of course. You know, if you listen to me on this show, I think we're shifting more towards a buyer's market. You know, between 30 and 50% of markets right now in the country are considered buyer's market. The other 50% are moving in that direction. So not all of them will, but a lot of them will. That means that you, as a buyer, have negotiating power. And one of the best things to negotiate for right now is a rate buy down. I think this is just like a psychological thing, where a lot of sellers, they don't want to move off their price. You know, they have some idea in their

• 27:26Dave Meyer?

  head of what their home is worth, what the property is worth. That's what they want to sell it for. Okay, so rather than negotiating five or 10 grand off the sales price, just negotiate a great rate buy down that costs five grand. Right? They might be willing to do that, even if they won't negotiate on price. It's just an option that you have. It's another tool in your toolkit to try and improve your cash flow. And that might actually improve cash flow if that's your goal. That might improve your cash flow more than getting a discount of five to 10 grand on a purchase price. Because that, you know, that's not going to really affect your monthly payment as much as that rate buy down might. I got some more questions about how to find the right lender to work with for your situation. But we got to take one more quick break. We'll be right back.

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• 31:49Dave Meyer?

  Welcome back to the BiggerPockets Podcast. I'm Dave Meyer here with Jeff Welgen talking about financing in 2025. All right, Jeff, let's turn our conversation to finding a good lender, because you know, all these things sound great, but a lot of people get intimidated by going out, talking to lenders, figuring out the right one for them. How do you recommend to people, starting the search for a lender?

• 32:13Speaker 01

  Do your research. Make sure you're researching the company. Make sure they have a lot of great reviews. I would research the loan officer. You know, find out if they've been in the business, you know, for the last few years, how long they've been in the business. Ask a ton of questions. I mean, again, going into that mindset with there are no stupid questions, and finding out, you know, do they work with real estate investors? I mean, a lot of companies have shifted over to trying to work with real estate investors over the last year or two to increase volume, which has caused a lot of problems. So just, you know, finding out whether or not they are truly, you know, a lender that works with investors, and then ask them about, you know, current clients that they're working with, their portfolios. Do they invest in real estate? What does their portfolio look like?

• 32:54Speaker 01

  And, you know, if you don't like the answers, I would say there's tons of great lenders out there. Move on to somebody else. I mean, you guys do such a great job here. I mean, my recommendation is, ask any current investors that you know in your network. Check with, you know, personal referrals are always the best. And then, you know, BiggerPockets Lender Finder, I mean, you guys do an incredible job of vetting your lenders. I mean, I've had the opportunity of meeting quite a few of them, and I mean, they truly are there to serve real estate investors, and they're not just, you know, kind of fly by night, going to be gone here once the market shifts. So that would be my best recommendation when trying to find lenders. You know, full transparency, again, not every lender, I mean, there's no lender that does everything. So you want to make sure you're talking to the right lender

• 33:36Speaker 01

  based off of what your goals and objectives are, because when you're looking at it, if you're talking to a lender that only does conventional, or only does DSCR, or does fix and flip, but maybe doesn't do conventional. Depends on what strategy you're looking to do. You're looking to flip properties. You don't want to go talk to a conventional lender typically because they're not going to have bridge financing options typically. You know, ask the right questions, find out the type of lender that you're working with, make sure that matches the strategy that you're implementing.

• 34:01Dave Meyer?

  The one thing I'll say for me is red flag is just bad communication. Because like you said, when you get these conventional loan, like there's a lot of back and forth, you know, the credit check is typically pretty intense and you're going to have to talk to them a lot. And if they're disorganized or can't provide communication in a way that is conducive to your lifestyle, that to me is the red flag. Because a lot of brokers have access to similar products, but like what kind of personal care are they giving to you, your situation, finding your light loan product and then helping you make sure that this loan gets closed? Like that to me is, it sounds like table stakes, but you'd be surprised that sometimes it is not there.

• 34:45Speaker 01

  And it's gotten a lot worse over the last couple of years because of what I mentioned. And then as we get busier again and we hit a refinance market, it just, we get inundated and then we're understaffed again. So that's always the trade off here. And it is, again, if you're not hearing from your loan officer every day, that's not a red flag. But if you're not hearing from them or not at least getting a weekly update or so, or if there starts to be problems and you don't hear anybody, you know, for two weeks, you really need to start, you know, making some calls and figure out a plan B because it's just, that's one of the biggest horror stories that we've all heard. And I know you've heard, it's just when there's a problem, my industry has a tendency of burying our head in the sand sometimes. And so, you know, which can lead to much larger problems and you just don't want to

• 35:28Speaker 01

  make sure you're not getting close to a close, you know, close of escrow and end up losing your EMD because of it. So if the lender's unable to perform.

• 35:36Dave Meyer?

  Got it. Well, thank you. That is super good advice, Jeff. Any last advice for our audience before we get out of here?

• 35:43Speaker 01

  Yeah, I mean, I would just say going back to what we originally were talking about of, you know, trying to look for ways to find the best rates and really balance that out with what your longer term goals and objectives are. You know, ask your options. You know, again, go back to whoever you're talking to. It doesn't matter what, you know, what type of lender it is. Find out what your options are with each lender. Find out what they they offer. And one of the things that I always like to get out there that just doesn't get enough coverage, unfortunately, in my industry, you know, the really the difference between conventional and non-conventional financing. With conventional loans, you know, primaries, second homes and investments, you're never going to have a prepayment penalty. They're not allowed. So just know you'll have the ability to refinance or sell at any point.

• 36:25Speaker 01

  On the non-conventional investment property financing side, there's prepayment penalty options. So just know that, you know, you have anywhere between a zero and a five-year prepayment penalty. So just know that when you're getting a DSCR loan or any type of non-conventional investment financing loan, whether it's full doc, an asset qualifier, business bank statement, DSCR, you're going to have these options and you really need to make sure you're asking the right questions. Because one of the biggest things that we've seen here is so many people, so many clients, unfortunately, that have ended up in these longer prepayment penalties and they didn't even know that they had one. So now that we're, you know, rates are starting to dip.

• 37:05Speaker 01

  We're talking to more clients that want to refinance and they're finding out that they had a five-year prepayment penalty that can be thousands of dollars. And so it is on the first page of the loan estimate. It halfway down, it states what the prepay is, what the, you know, the length of time, how much it could potentially be. You just need to make sure you're reading the documents and knowing what you're getting ready to sign because with a lot of our clients that are doing, you know, longer term rentals, where we're utilizing some of these strategies, the five-year prepay makes perfect sense because you're locking in returns. On the other side, if you want a shorter timeline, if you're thinking about selling or you want the the flexibility to refinance, you really need to know what your options are and, you know, ask for different prepayment penalty periods.

• 37:48Speaker 01

  And so you can compare and see how the the deal pencils out.

• 37:51Dave Meyer?

  It's one more variable that I think a lot of people overlook, right? The the prepayment thing because most people just assume you can pay it off whenever you want, but it it does work a little bit differently and you can use it strategically.

• 38:03Speaker 01

  Absolutely. And on that side, I mean, it really just comes down to my industry doing such a great job of almost training, you know, the general public to rate, rate, rate, you know, the rate's the most important thing when it's there, what is behind the rate, you know, what's the cost, true cost of the rate? How long are you going to be locked into the loan? And really, Paying attention to those details because if you, you know, call around to five different lenders and just ask them the rate and you're looking at types of financing where there's prepayment penalty options, they're just going to give you the lowest rate typically and not explain the details unless you ask. So again, going back to you've got to be your own best advocate. You have to ask a lot of questions and going back to what you were asking about any other advice, if you don't like the answers that you're getting, or if it's evasive, or they're not getting back to you and the

• 38:48Speaker 01

  communication's not great, move on. I mean, there's plenty of great lenders out there.

• 38:52Dave Meyer?

  All right. Well, Jeff, thank you so much for joining us. This was just super helpful information and context. This is great.

• 38:59Speaker 01

  Real quick here before we break, what do you think rates are going to be by the end of the year?

• 39:02Dave Meyer?

  My end of the year, I'm as of now, I think they're still going to be similar to where they are, maybe a little bit lower, six, five. I've said it before, I'm not going to get into the bond market right now, but the bond market needs more clarity before it moves more in any direction. And I just don't think we're going to get that clarity in the next six months. That's my main thing. Even if the Fed lowers rates, I don't think it's going to go that much lower. So I think we need more clarity on inflation, jobs numbers, Fed policy, impacted tariffs, like all these things, we just don't know. We don't have enough information yet. So I think things are going to be locked up a little bit longer.

• 39:37Speaker 01

  Well, I think we're going to have a lot more clarity between now and BPCon. So it's going to be interesting to see what you think by then.

• 39:42Dave Meyer?

  I think we'll have a rate cut before BPCon, if I had to guess.

• 39:45Speaker 01

  I don't know if you want to place a little bet here in the spirits of going to Vegas, but.

• 39:47Dave Meyer?

  Let's do it.

• 39:48Speaker 01

  I, yeah, I'll say, I mean, I throw in a dart of the board here, six and a quarter on 30-year fixed primaries at the end of the year, December 29th, three and three quarters on the Fed funds rate. And I'll go out on a limb and I'll say this time next year, we're going to be somewhere around five and a half on the 30-year fixed, maybe even five and a quarter.

• 40:04Dave Meyer?

  Okay, three and three quarters. I don't disagree with that. I actually think that's probably, that one I'm not betting you on. I will bet you, I don't know, drink of choice, Jeff, that by the end of, end of the year, I'm going to go at six and a half for 30-year fixed. I can't bet a year from now. I have no idea. I'm throwing it over the board at that point, but yeah, we'll see. Okay. I like this bet. The spirit of going to Vegas. If anyone also wants to join Jeff and I in Vegas, we still have some BPCon tickets left. Go to biggerpockets.com/conference. You can also hit me up. I have a special discount code. It gets you a really nice discounted price. If you want to message me, you can hit me up on Instagram where I'm at the day to daily. I will share my discount code with anyone listening to this podcast.

• 40:49Dave Meyer?

  All right. Thanks again, Jeff. All right. Thanks, Dave. See you in Vegas. All right. And thank you all so much for listening. We'll see you next time for another episode of the BiggerPockets Podcast.

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