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Author: Mark Ainely | Partner GC Realty & Development & Co-Host Straight Up Chicago Investor Podcast

If you are still trying to buy rental property in Chicago and you are only looking at deals through the lens of today’s rates, you are probably missing opportunities. That is the big takeaway from this Tuesday Tip with Michael Scanlon. In a market where 6% debt can crush cash flow fast, assumable loans create a different path for investors who know how to spot them and structure them correctly.

This episode stays very practical. Michael breaks down which loan products are assumable, why VA loans can be especially interesting, what buyers and sellers need to understand before moving forward, and what kind of timeline to expect. He also shares a real example of a recent assumption deal where the buyer stepped into a 2.75% rate and dramatically changed the numbers on a Chicago property.

For Chicago landlords and investors, this is the kind of financing conversation that matters. Not because it is flashy, but because it can materially change what a property is worth to you. When rates are high, finding a property with assumable low-rate debt can create more value than a renovation plan ever could.

Questions We Answer in This Episode

Q: What loan products are assumable and which ones are not?
A: Michael explains that conventional loans are generally not assumable. Typical Fannie and Freddie conventional financing is usually off the table. The products investors should really pay attention to are FHA and VA loans, because those can be assumed. That is where the opportunity starts.

Q: What makes VA loans more interesting than FHA loans?
A: VA loans have more flexibility. Michael explains that FHA loans typically need to be assumed by another owner-occupant, while VA loans can be assumed by another veteran or even by a non-veteran, including a pure investor. That makes VA loans much more attractive from an investment standpoint, especially when you are trying to create leverage in a higher-rate market.

Q: What does “entitlement” mean in a VA loan conversation?
A: Entitlement is basically the amount of VA-backed borrowing a veteran has access to. Michael and Tom simplify it well in the episode. A veteran cannot just keep doing unlimited VA loans with no consequence. If someone else assumes their VA loan and is not another veteran restoring that entitlement, the original borrower may leave part of their borrowing capacity tied up in that deal.

Q: Why would a seller ever allow a buyer to assume their VA loan if it affects entitlement?
A: Because the seller may be able to get a higher price. A low-rate assumable loan makes the property much more attractive to buyers. Michael gives an example where the seller understood exactly what they were giving up, but the upside was being able to sell at a stronger number because the buyer could take over a 2.75% interest rate instead of buying with new debt closer to 6%.

Q: What did Michael’s recent assumption deal look like?
A: He shares a deal where his buyer assumed a 2.75% mortgage with only 25 years left on the amortization schedule. On a roughly $930,000 purchase, that created a 9.5% cash on cash return, plus about $2,000 a month in principal paydown. That is the kind of structure that can completely change how a deal performs.

Q: Does assuming a loan mean you need to bring a huge down payment?
A: Not always. That is one of the myths they push back on in this episode. Michael explains that many people assume they will need to put 40% down or some outrageous amount, but that is not always the case. In the example he shares, the buyer was in the deal for about 21% down. Depending on when the property was bought and how much it appreciated, the number may be much more reasonable than people think.

Q: Why are recently purchased properties especially interesting for assumable loans?
A: Because a lot of FHA and VA buyers came in with very low down payments over the last several years. If the property has not appreciated too aggressively, there may still be a path for a buyer to step in without an excessive cash requirement. Michael points out that the last five years are especially worth analyzing for these opportunities.

Q: How does local appreciation affect the strategy?
A: A lot. Michael uses Bronzeville as an example and explains that it had not appreciated as sharply as some other parts of Chicago over the same period. That worked in the buyer’s favor because the equity gap they had to cover was more manageable. In other neighborhoods, appreciation may force the buyer to bring much more cash to close.

Q: What was unique about the buyer in Michael’s example?
A: The buyer was using 1031 exchange funds across multiple properties and wanted to maximize leverage on the second purchase. The assumable loan helped make that possible. Instead of taking on new expensive debt, they were able to use a more creative structure and buy more than they originally thought they could.

Q: What fees come with a VA loan assumption?
A: Michael says there was a half-point fee on the VA loan assumption in the deal they closed, along with regular traditional closing costs. One big difference is that there was no appraisal required because the buyer was assuming the existing loan rather than originating a brand-new one.

Q: Is the process faster or slower than a regular closing?
A: Slower. Michael says their deal took three and a half months, which he actually did not think was terrible for a VA assumption. He believes 60 to 75 days is possible in the right scenario, but he makes it clear that these deals require patience. The servicing companies handling the assumption are usually not moving with the same urgency as a lender making money on a brand-new mortgage.

Q: Why can these deals drag out?
A: Because the processor handling the file is working through a different kind of system. Michael points out that traditional lenders are motivated to close because they are generating new business. In an assumption, the servicer is effectively handing over a very low-rate mortgage, so the incentive to move quickly is not the same. In his recent deal, the process was also complicated by the servicer being acquired during escrow.

Q: What should investors understand about FHA assumptions before getting excited?
A: The mortgage insurance issue matters. Michael explains that unless the original FHA borrower put down at least 11%, the monthly mortgage insurance premium is not going away. Even if the new buyer has much more equity in the deal at the time of assumption, that monthly MIP stays unless they refinance. That is an important cost investors need to underwrite correctly.

Q: Why would someone assume an FHA loan if the MIP stays in place?
A: Because even with that extra cost, the rate may still be far better than what is available in the market today. The key is to factor the permanent MIP into the numbers and decide whether the loan still makes sense. Michael’s point is not that FHA assumptions are always better, but that investors need to understand the full picture before they move forward.

Q: What is the biggest overall lesson for Chicago investors here?
A: Do not dismiss assumable financing just because it sounds complicated. Michael makes the case that if you are willing to analyze these deals carefully, you may find opportunities where the debt creates more value than any physical improvement ever could. In a high-rate market, stepping into a 2.5% to 3% loan can be a major competitive advantage.

Top 15 Timestamps

00:26 Why the team wanted to break down assumable loans for buyers still trying to purchase in today’s market
00:39 The big headline: some buyers can still assume 2% to 3% mortgages
00:45 Which loan products are assumable and which ones are not
01:07 Why FHA and VA loans matter, and where the distinction starts
01:15 Why VA loans get especially interesting for investors
01:46 Tom breaks down “entitlement” in plain English for listeners
02:05 How VA borrowing capacity actually works today
03:20 The tradeoff for sellers when their entitlement stays tied to the assumed loan
04:11 Michael’s real example of a buyer assuming a 2.75% loan
04:25 How that assumed rate created a 9.5% cash on cash return
05:09 Fees, closing costs, and why there was no appraisal on the assumption
06:20 What the process looks like once the assumption file is opened
07:12 Michael’s realistic timeline for getting one of these deals closed
08:40 Why low original down payments make recent FHA and VA loans worth analyzing
10:07 The FHA mortgage insurance warning investors need to understand

Takeaways for Chicago Landlords and Investors

Conventional loans are usually not assumable, so the real opportunity is mostly in FHA and VA products.
VA loans can be especially powerful because they can sometimes be assumed by investors, not just owner-occupants.
A low-rate assumable loan can make a deal work in ways a standard market-rate loan cannot.
Do not assume the required cash to close will be outrageous. In some cases, it may be much more manageable than expected.
Neighborhood appreciation matters. The more a property has appreciated, the more cash a buyer may need to bridge the gap.
The loan terms matter just as much as the property. A 2.75% rate with years of amortization already burned off can be a major advantage.
These deals take time, so buyers need patience and sellers need realistic expectations.
FHA assumptions need extra scrutiny because the monthly mortgage insurance may stay forever unless the loan is refinanced.
If you are working with exchange money or trying to maximize leverage across multiple deals, assumable financing can open up options.
In a high-rate environment, smart financing can create more value than a cosmetic renovation plan.

Guest Information

Guest: Michael Scanlon

Team: The Axon Group
Website: The Axon Group

Because finding good tenants and property management shouldn’t feel like online dating.

Dear Investor,

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