Portfolio loan vs cash out refi-What would you do?

Question

I'm in need of some wisdom from experienced investors. I'm trying to find out which route to take between Portfolio loan, refi, or if there are other options.

Here's my situation:

Property #1- Single unit commercial building in which I hold a free and clear title. Currently rented out.

Property #2- Five unit commercial building with all (5) units leased. Has a current mortgage and has a great deal of equity due to forced appreciation and a crazy low purchase price.

Property #3- Single family residential house. Rented- with a lease renewal as of this week. Has a current mortgage and has some equity.

My goal is to purchase at least 2 more REI's this year or a multi family, at the minimum. I'm wanting to access the cash, purchase REI's with cash then Refi on a 15- 20yr term.

Based on the above information, what are the suggestions from the experienced investors? Note, my wife and I have only a few years of investing under our belt but we are prepared to take a big step forward.  Feel free to PM me and I will share the numbers if you need them to give accurate advice.

Thanks in advance.

Reggie Rearden · Answer

Instead of doing a portfolio loan, we ended up having enough equity in our SFH to payoff our 5 unit commercial building. We're in the process now of getting a LOC against 80% of the equity of that commercial property.  The Holding company we own will hold the LOC. Looks like we're finally getting the ball rolling!

Jared Rine · Answer

@Reggie Rearden...if you're looking to max equity, I would do these individually, not bundle them into one loan.  Agree with @Greg Dickerson.

Greg Dickerson · Answer

The best way to proceed would be cash out refi on each individual property. You will be able to pull the most cash out this way and have the more flexibility if ou decided to sell one of the properties at some point. Porfolio loans are not easy to get and are not very user friendly. You also want to make sure each property is help in a separate LLC. Make sure to discuss that with your accountant and attorney.

Reggie Rearden · Answer

Each property is in its own LLC. We’ve been approved for the portfolio loan. The lender said they would combine the 2 currently mortgaged properties into 1 loan. I’d then have access to the remaining LOC. The other property that is owned feee and clear would have its equity wrapped up in the loan as well. I’m just wanting to get advice from others before I sign the dotted line.

Amandela Harris · Answer

@Reggie Rearden Hi Reggie! I am not familiar with the area but I am interested in investing in the area. Would you mind sending me a pm or sharing me that name of the banks in the area that are investor friendly?

Reggie Rearden · Answer

@Ronald Rohde I apologize for just seeing this response. The LLC that "controls" the others is the managing LLC. Our attorney set it up this way so the "Managing" LLC controls all other LLC's. The Managing LLC is just an added layer of protection, from my understanding, for legal purposes for when something happens. Me and my wife own the Managing LLC which owns the Asset LLCs. I think its like a Series LLC.

Ronald Rohde · Answer

Ok I would just clarify "control" do you mean "manage" or "is the sole shareholder"?

That sounds like a good structure with pass through accounting/taxes/income. Do you have any Fee entities to charge those LLCs?

Reggie Rearden · Answer

This is how our LLCs are set up:

ABC LLC controls all the other LLCs. (Master)

DEF LLC owns 1 commercial property

GHI LLC owns 1 commercial property

JKL LLC owns 1 residential property. I'm adding another residential property to this LLC and will continue doing so until my attorney says its time to create a new entity. This is dependent on equity owned by the LLC.

All of the profits shoot up the ladder to ABC LLC, in which it turns around and purchases another property. ABC LLC essentially holds all of the profits until I'm ready to buy again. Just for a little more clarification, I have to keep an excellent credit score and limited debt as part of my W2 employment is to why I have several LLCs. I can not have any legal issues and try to stay as FAR away from being associated with my assets as possible.

Ronald Rohde · Answer

I would do individual loans to max the cash, once you've added this years properties, look at a portfolio again. If your parent company is in the same LLC it would make that single loan MUCH easier...

Portfolio loan vs cash out refi-What would you do?

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