Want advice on commerical loans for single family portfolio

18 Replies

I'm getting close to maxing out the (11?) loans that I am allowed on my personal credit. I continue to find single family and TH deals that I want to hold long term. I have an option with a local bank but they want 25% down (won't allow a bridge loan to brrrr my money out without a 6-12 mo seasoning period) the rates are much higher than freddie/fannie loans (5%), and I believe they will only do a 20 year amortization.

I'm not super familiar with portfolio loans but I assume that's when you package multiple SFHs and THs into one large loan? I am looking for advice or options to get either a portfolio loan or a type of commercial loan where I can take some of my properties off my personal credit to free up some spaces for new low interest loans. My current loans are around the 3.25-3.625% on my SFHs that are on my credit. I would be willing to sacrifice a little bit on paying a higher interest rate, but not 5%. I also need a 30 yr amortization. Even though my properties cash flow, I have pulled out most of my cash so a 20 yr am wouldn't be ideal.

I've also considered adding my wife to my business and showing the income to her so that she could get 11 loans. Any advice on any of this would be much appreciated!

@Chris Potter congrats on building up your rental portfolio. Sounds like you've been finding great deals.

Just a point of clarification. You can have individual properties with individual loans on them with a portfolio lender. What a portfolio lender is is a bank or credit union that carries the loan themselves. That means it isn't backed by Fannie or Freddie so they are not limited to any specific number of properties. Because they are not backed by Fannie or Freddie, these lenders can be a bit more strict on their qualifications since they are assuming some risk. They also typically have higher rates. Right now, my partner and I have stellar credit and typically hit a 1.2 minimum debt coverage ratio. We can get portfolio loans with our lenders at 20% down, but our rates are between 5.25-6.5% right now. I know it's high, but we analyze our properties with these rates so we work it into our deals up front. 30-25 year amortizations and terms are pretty easy to find as well, but I think the sticking point for you might be the rates.

Adding your wife might be a good option, but at some point you'll grow past 20+ properties. Looks like you're finding deals and that is a good problem to have.

DM or email me if you want to chat more about it. Best of luck.

@Rico Nasol What lender are you using for your portfolio loans? I have been searching for months and eveyone is telling me their programs are on hold due to covid. 

@Troy Bailey I have used LimaOne, Finance of America and local banks in the areas we invest. Those are places you can start. DM me if you have other questions. I also have access to other options if those don't workout for you.

The rates on a portfolio loan depend on the size and quality of your asset package, the bank can make them to whatever they want.

If you have a package over one million of quality assets you should be able to get rates around 4% fixed for 7 to 10 years and amortized over 25, which is not bad, because your principal pay down is faster. 

Rates get even better for 5M and up; when I was still at corporate we used to borrow from a local bank short term money for 1% below 30 year fixed! 

@Marcus Auerbach ,

thanks for the info.  I would consider a loan on my portfolio at 4% interest for 7-10 years with a 25 yr amortization.  Would that be with a local or national bank?  Have you got any that you could refer me to?  My portfolio is well over 1M.  My local bank will only do a 20 yr am with a rate around 5%.  I haven't shopped other local banks but just curious if that is a product that a local bank might consider.  Thanks

@Rico Nasol ,

thanks for the information. It sounds like the loans you are getting are similar to my local bank. I would consider rates like that for the right deals and I may have to. I guess if a deal is good enough the rate really shouldn't matter. Living in Utah, our cap rates are lower so the equity really has to be there to get really good cash flow. I'll look into LimaOne and Finance of America and maybe shop more of my local banks for a little bit better terms

@Chris Potter this is with a local lender in Milwaukee.

One of the perks of working as an agent is that I get to know a lot of banks and those rates are about as good as they come. But it's also about how you present yours biz, because they will adjust the rates based on the deal, the quality of the assets and the overall perceived risks. So the same bank will quote me one rate and another guy maybe an even better rate, in particular for larger deals.

This lender is very risk averse, when corona started and tenants lost jobs their underwriters went really deep on that issue and would turn away a lot of deals.

Here is what you can do: find your top 2 or 3 local banks with best rates and groom relationships with those lenders, have some smaller commercial loans with them over time, make sure your business and your assets are attractive and low risk.

Banks want to lend money and in the commercial world they are always looking for low risk deals they can fund. I know a local builder, who just had completed his first large multifamily in his own name - 5 star project in a luxury area in the outskirts of Milwaukee. He had rented it out before it was comleted and he told me the bank activley approached him to do another one and offered a financing package that was even better than we he had with them on the first project. That was a big aha moment for me!

Originally posted by @Troy Bailey :

@Marcus Auerbach those are great numbers! My portfolio is in the 800k range and I’m getting rates in the 7-8 from the few lenders that will work with smaller single/multi family homes.

 It can be the lender, but it also could be the asset class you have. If you are heavy on the cash flow side, you will see higher rates. See my other comment as well.

These lenders used to bundle mortgages into an umbrella type of product, also called a blanket or aggregate.  Not sure if they still do, but work looking at.  Corevest, Colony American, Visio, Conventus, Dayton Capital, Upen Patel at Federal Savings Bank, and possibly Mofin (@George Despotopoulos )

Originally posted by @Kerry Baird :

These lenders used to bundle mortgages into an umbrella type of product, also called a blanket or aggregate.  Not sure if they still do, but work looking at.  Corevest, Colony American, Visio, Conventus, Dayton Capital, Upen Patel at Federal Savings Bank, and possibly Mofin (@George Despotopoulos)

We can definitely do a blanket loan or cross-collateralized loan. When it comes to OP's initial comment, our rates wouldn't meet their expectations here. We're a non-bank direct lender. We use our capital to lend to investors. We have a different set of criteria and underwriting process than a bank or non-qm lender would have. Our loans/process does not look @ personal income, net worth, DTI, etc. We look at the property's income. We can offer a 30 yr fixed rate cash-out (70% - 75% LTV) but the rates would be in the 5% - 6% range.

@Chris Potter I work with mutliple commercial lenders,and depending on credit I have seen portdolio loans at 4.25 for 1 million. Lets connect if you still need help with this portfolio loan so you can move quicker to your next investment.

Updated 15 days ago

I work with mutliple commercial lenders,and depending on credit and scenario, I have seen portfolio loans at 4.25 for 1 million and possible an option to buu down to 3.5. Lets connect if you still need help with this portfolio loan so you can move quicker to your next investment.