Cash out refinance on my entire portfolio

Wanted to get your everyone's feedback on this scenario. I'm hoping to leverage some existing equity in my REI portfolio to pay off some student loans. I currently own 5 residential rental properties (with 5 different mortgages) that all have seasoned titles. Total Mortgage balance is 128,416 and the properties are valued at 165,000 all together. Before I approach my broker, I wanted to see what the typical commerical LTV cash-out refi loan requirements are....

Would it be reasonable to request 90% on the entire portfolio? i.e. 90% on 165k=148,500-balance owed (128,416)=approx 20k. Any other thoughts on how to approach this would be appreciated.

Jeff Sielicky

Real Estate Investor · Portland, Oregon

721 posts
6 awards
73 influence

Jul 08 '11, 08:06 PM

Are you ready for expensive appraisals and lots of closing costs?

If you were at a regular lender they could give you an internet appraisal and tell you upfront. A broker could be a different story.

You might try walking into a commercial bank or credit union and see if they can help. Chances are though they won't go above 80% but haven't tried myself lately.

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

Moderator Pro

12,319 posts
15 awards
95 influence

Jul 08 '11, 10:10 PM

80% is probably the upper limit. More likely 70-75%.

Jon Holdman, Flying Phoenix LLC

Patrick Howell

· 42020, Kentucky

35 posts
1 award
50 influence

Jul 09 '11, 12:07 PM

Thanks Jeff and Jon,

Do you have any suggestions on how to request such a mortgage product? Would it be straightforward to ask my banker "I would like to look at refinancing all my existing mortgages into one rolled mortgage product?"

I also feel that the overall values of the combined properties is still under market value. Would this be a classic situation where I would be better off to get all of the properties reappraised to know exactly what the total values are? I'm assuming the bank might require new appraisals as well. Maybe I should try to sweet talk a local realtor to run comps on all the properties for me?

Darryl Dahlen

Commercial Loan Officer

Donor
Pro Basic

595 posts
10 awards
55 influence

Jul 09 '11, 12:45 PM

Talk to your bank to see if they will even consider a blanket loan, and if they will, at what LTV.

This type of product would almost certainly be a portfolio product. Meaning, the bank is going to lend their own money and take all of the risk.

As such, blanket loans are pretty rare these days. Still, it doesn't cost you anything to ask.

Daniel Payne

Real Estate Investor · Ocean Springs, Mississippi

115 posts
4 awards
50 influence

Jul 13 '11, 09:42 AM

Just curios here, but are you going to come out ahead by doing this? Student loan interest rates are typically low, the interest paid is an "above the line" tax deduction (can take even without itemizing), after refi costs, appraisals, etc...

With the Passive Activity Loss limitations, you may not even reap any additional tax benefits for paying additional interest on the new, larger refi'd mortgages in your rental business.

Just a thought. I'd run the numbers before I cashed out most of my equity.

Monty Busch

· Dallas, Texas

7 posts
50 influence

Jul 13 '11, 02:31 PM

if hard money is an option, probably 50%-55%.
A local bank (portfolio lender) will want full financials, good liquidity and high credit. We have closed some and it was about 65% of value.

You would be putting a noose around your neck at 90% and even 80%.

Monty

Rich Schroeder

Real Estate Investor · Wisconsin

452 posts
4 awards
50 influence

Jul 13 '11, 05:02 PM

My local bank will go 75% LTV. It is a local bank. This is with very good credit and significant assets. Not sure what you're thinking of doing is what I would do. As mentioned above, student loans are low interest. Can you refi and get a better rate than your current student loans? Also, be prepared to incur closing costs.