Opinions on this deal

21 Replies

I have a portfolio of 7 properties, 9 units total, current ARV is 750,000. I have been offered a 30 yr fixed 6.5%, 1% origination, for 575K loan value to the portfolio. It has a no pre payment penalty and is pretty straight forward for a commercial loan. I am thinking this is pretty good based on rent roll to value but what do you guys think?

Sounds very high per door price. . What is the rent?

Also a good commercial loan should be around 5 to 5.5%(or less)

This is a portfolio of homes that I currently own and am looking to leverage to get some money out of them.  My net return on the cash annually is 12.47%.  I am in the portfolio of homes for a total of around 640K.  Hope this helps.  I am just looking for some opinions as I have not financed anything in the last 7 years.  Treading into new waters again here.

I had a local bank offer a 4.5% 20 year financing.

wow. Maybe this is not that great then. I thought 6.5 was pretty decent. This is through First Key Lending.

have you tried a local credit union...usually easier to get financing, better rates, and less hoops to jump through

This is what I'm reading.  Is this correct:

$575,000       Loan

$3,634.39      Payment (30yr/6.5%)

What is your:

1 - Cash Flow (not %...actual number)?
2 - Cash still left in the deal after you refi/

Joe

Here are my numbers:

annual rent gross: 99,636

annual net after expenses: 78,021

The potfolio has a value of 750K.  They are willing to offer me 575K loan based on my numbers.

ANCF - ADS = ANCF w/financing
$78,021 - 43,612.68 = $ 34,408.32.....

ANCF w/Fin / units = ANCF wF per door
$ 34,408.32 / 9 = $3,823.14 per door/year......$318.60 per door/month

How much cash do you still have in the deal?

Why are you doing it?  Do you have plans for the REFI cash?

I'll have 124K of my money tied up still in the portfolio.  I am looking at using the money to purchase an additional 8 properties here in Kansas City.  I appreciate any feedback! Thanks Joe

Joe seems to be leading you the right way. So all I have to contribute is that: 6.5% is brutal, I'd pass there are much better rates out there. 

@SethWilson

I am in Kansas City as well.  Do you know where I might be able to ask about portfolio lending around here in the local area?  Do you have any contacts?  I have not had financing in years and am wading back into it.

I guess the real question is what is the CASH return (CCR) from the new investments. 6.5% seems a bit high. I can get 4.25% for 30, but I'm here, and you're there. Before you pull the trigger here, I'd investigate a little more for a better rate.

On the other hand, what is the cash return from the new investment?...as in what's the trade off?

No dont' do it Tim! That's 8 properties I may have been planning to buy!

Haha, kidding aside... I'd say shop around and then do it. No reason to leave any stone unturned when talking about that much money. (stone meaning mortgage co./credit union)

p.s. I am biased, and believe that for a patient person, leverage is the ultimate compound interest. 

However, all that being said- is it just me or is bigger pockets watering down the KC returns ; )

Joe,

I can buy properties out here and pretty realistically make 12% net on each property.

Kendall, Any sources for lending you can pass on for a portfolio?

Your rate will depend on your credit score, proof of income, and ltv of the properties. There are many mortgage brokers in Kansas city. Give one of them a call a see what they can get you given your situation. If you have a great credit score, low ltv, and proof of income and lower than 10 financed properties on your credit report, you should be able to get your 30 yr fixed rates in the mid to high 4% range.

Originally posted by @Timothy Aughinbaugh :

Kendall, Any sources for lending you can pass on for a portfolio?

 The 2 people I always go to first are Bridget Fairchild from Capwest Mortgage and Carmen Goss from bank 21. 

Approx 4 months ago did a commercial loan at 5%.  This was a portfolio for new construction, 25 year term & amount of 1.3 mil.  The bank is a smaller regional who we have experience with.

I would shop around.

having a hard time finding a lender, unreal! It's like I have the plague......

Originally posted by @Timothy Aughinbaugh :

having a hard time finding a lender, unreal! It's like I have the plague......

 capwest and bank 21 turned you down?

Kendall,

Never had to get there.  I looked up an old friend at a local community bank and met with him.  We are currently structuring a deal that should be beneficial to take the equity out of the portfolio to reinvest.  If it falls apart for some reason I was going to contact Bank 21 and speak to Tyler.  Thanks!

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