Hello BP,

On a BRRRR when refinancing, do you just go through a normal bank and ask for a conventional loan or do you go to a commercial bank? What if you cannot get a 30 year fixed? Would you still do the BRRRR with a commercial bank or is that just a dumb idea?

You're on the right track here, @Stephen Brown !  

It wouldn't be dumb to BRRRR into a commercial loan, BUT all things considered a conventional loan is superior or many people's needs compared to a commercial loan. It is common for a conventional loan to be amortized over 30 years and fixed at a dirt-cheap interest rate for those decades, while it would be very uncommon to find a commercial loan that offers that (unless there is a kickback or side-angle somewhere).

IF you weren't able to go Conventional, Commercial loans are a great options, and for some situations they might in fact be better.

Hey @Stephen Brown , what do you mean by commercial bank? Most banks offer conventional loans and bank loans. Conventional loans are sold on the secondary market and have federal restrictions (Fannie Mae, etc.) Bank loans are financed in-house. If possible, refinancing into a conventional mortgage will render lower interest rates and have the 30-year amortization. 

@Stephen Brown

You've got the concept down pat. Cash is best. Conventional is second. Commercial/Portfolio/DSCR/Asset based lenders (whatever you want to call us) are next.

Originally posted by @Forrest Faulconer :

Hey @Stephen Brown, what do you mean by commercial bank? Most banks offer conventional loans and bank loans. Conventional loans are sold on the secondary market and have federal restrictions (Fannie Mae, etc.) Bank loans are financed in-house. If possible, refinancing into a conventional mortgage will render lower interest rates and have the 30-year amortization. 

 Portfolio lender, 5 year fixed 20 year amortization.

Thanks for your help!

@Stephen Brown Good job seeking out best lender fit. 

Generally speaking I have seen the best short and long term relationship being made with a mid-sized regional banking entity, thin 3 to 10 branch locations, who primarily operates in the standard banking space with a vibrant business banking side, who upon inquiring does do some portfolio lending. 

They often "get" the whole rental real estate side very well and being so local are rather keyed in with the area market, and most receptive to growing such relation BUT also have all the standard options on mortgage origination as well for any deals that don't fit into that portfolio side perfectly. 

20yr amortization I see as rather standard vs 30, but I have seen 25 and 30 as well. Depending on the strategy I'd want a little better fixed, say 7yr, but starting out the relationship 5yr is more than fair. 

I'd also suggest to start laying to future path bricks early in the conversations but in the humblest way possible such as "going forward I'd really like to grow and expand upon this relationship, and at a future date discuss potentials for an acquisitions line of credit for short term holding of properties that at a set holding $ rolls into an umbrella commercial mortgage of some kind. What kind of things would be best to put together over the coming months to move in that direction?". That is a win-win if/when you get there and expect them to be a bit "yeah, that's  a bit pie in the sky" response to you on this but what's important is dropping that nugget early, and with each added deal adding to that stack one stone at a time and eventually, they will bring it up to you and start extending capital offerings at you. 

Originally posted by @James Hamling :

@Stephen Brown Good job seeking out best lender fit. 

Generally speaking I have seen the best short and long term relationship being made with a mid-sized regional banking entity, thin 3 to 10 branch locations, who primarily operates in the standard banking space with a vibrant business banking side, who upon inquiring does do some portfolio lending. 

They often "get" the whole rental real estate side very well and being so local are rather keyed in with the area market, and most receptive to growing such relation BUT also have all the standard options on mortgage origination as well for any deals that don't fit into that portfolio side perfectly. 

20yr amortization I see as rather standard vs 30, but I have seen 25 and 30 as well. Depending on the strategy I'd want a little better fixed, say 7yr, but starting out the relationship 5yr is more than fair. 

I'd also suggest to start laying to future path bricks early in the conversations but in the humblest way possible such as "going forward I'd really like to grow and expand upon this relationship, and at a future date discuss potentials for an acquisitions line of credit for short term holding of properties that at a set holding $ rolls into an umbrella commercial mortgage of some kind. What kind of things would be best to put together over the coming months to move in that direction?". That is a win-win if/when you get there and expect them to be a bit "yeah, that's  a bit pie in the sky" response to you on this but what's important is dropping that nugget early, and with each added deal adding to that stack one stone at a time and eventually, they will bring it up to you and start extending capital offerings at you. 

 Thanks James I appreciate it!