in my condo they want to restrict the amont 2 be rented. is there a % that mortgage companies wont loan $?

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My association is trying to restrict the amount of renters. Does any mortgage companies not allow people to borrow money if the rental rate is over a percentage? If so what is the percentage that we should keep it under?

  1. Reply
    sudi p
    April 29, 2011 at 11:58 pm

    I think it depends upon the bank

  2. Reply
    Floyd B
    April 30, 2011 at 12:00 am

    You are restricting rentals so why would any bank even care?

    Restricting rentals in condos is a positive not negative thing.

    The banks wouldn’t be as quick to give mortgages in condos for rentals

  3. Reply
    April 30, 2011 at 12:45 am

    If you are trying to buy a condo, your lender will check to see what the percentage of renters to owners is in that building before they will decide on a rate, etc. If a building has a high percentage of renters (as opposed to owner-residents), it is a red flag.

    It can be a sign that the property is a bad one and/or that none of the owners actually want to live there. Maybe they can’t sell their units, so they’re all renting out their units. Plus renters don’t take as good care of the grounds, they use the amenities more, etc.

    Therefore, since people could have trouble getting financing to buy units at your building, sellers will be forced to lower their prices and units may sit on the market longer. Your association wants to avoid that situation, obviously. However, you always have the right to rent out your unit; it is a basic right of ownership that comes with purchasing real estate. So I’m not sure how they’d restrict that unless they got you to sign something…check into it.

    Most lenders don’t care too much (or they’ll just raise your rate), and they compare the percentage of rent vs. own with whatever is normal for your city. So figure out what’s average and try to stay below that. Historically, though, if more than 20-30% of units are rented out, it starts to be a negative.

  4. Reply
    April 30, 2011 at 1:09 am

    FHA requires 51% owner occupancy for the project to be eligible for FHA financing. Some conventional lenders would allow as high as a 60% investor concentration. Any more than that, and everyone might have a tough time getting financing.

    I’d restrict it to maybe 40% investors, max.

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