Multi Family portfolio in Los Angeles, financing questions

6 Replies

Hey Everybody Hello from Houston!

This is my first question/posting, i am relatively new to BP really enjoy the info on forums and podcasts.  This site is awesome and i wish i came across it 4-5 years ago

Anyway...so FINANCING question/Help needed

I have been investing in RE since 2009 mainly in multi units in Los Angeles

Two 4plexes, 

One SFR,

One SFR that i built a 2nd unit on and I guess now is considered a duplex.

In addition to the above I own a personal residency SFR

4 investments 1 personal residency, total 5 loans.

I wanted to tap into the equity of the SFR that is now a DUPLEX yet i found out AFTER the project was completed that I cannot do a refi cash out due to the amount of loans I have, but that I can try to do a HELOC and then after 6 months if i have used the funds for investment or what not, then i could refi that into a fixed rate loan say a 30 yr or whatever.

This sounded swell... Until the bank I was going thru told me that they dont do HELOC on a duplex for a non owner occupied property.

So my questions to the forum are: 

1) What do investors do to access their equity if they have more than 4 properties on non owner stuff ASIDE from hard money lending - like a refi cash out for more than 4

2) Is there a non owner occupied HELOC that works for multi units?

Again the business im conducting is primary in Los Angeles regarding real estate so I dont know if theres state specific mandates any feedback would be a tremendous help!!!

Thanks in advance and look fwd to connecting with others and actively posting in forums with my experiences over the years.

Alex J. MBA, EA, LArentsite | [email protected] | http:///www.larentsite.com

Did you add the second unit with permits and the City's permission?  If not, the appraiser will probably slaughter you.

The question you asked is what so many of us investors spend a lot of time working on.  You should be able to get loans up to 10 properties through the typical lenders.  Loans 5-10 are harder to get.  After that you will have to live in the commercial lending space.

It sounds like your property is free-and-clear. Lenders usually will give you less LTV versus a rate-and-term refinance.

1. Call 5-6 conventional lenders and say you already have 4 mortgages in your name.  You would like to do a cash-out refinance.  What are the requirements?  You likely will have to have cash reserves and report decent income on your taxes.  

2. Talk to some commercial banks and credit unions.  Talk to the commercial loan division not the residential.  Farmers and Merchants has some good programs for LA County.  The downside is you likely will end up with a 5-7yr fixed rate and a balloon payment.

One smart thing that I wish I did more often is to put Deeds of Trust on properties that are friendly.  If you had a loan on it from a "family member" it is much easier to do a rate and term refinance.  

Yes the property I am wanting to refi cash out is actually a legally permitted duplex and has significantly appreciated... I have 5 loans in my name already.... two fourplex, one duplex, one sfr, and one personal sfr

Regarding the duplex im trying to refi-cashout...I don't own it free and clear theres a loan on it currently which i think is the issue im running into with a refi cash out.

I am not having a problem getting the loan i am having a problem getting a refi cash out... all the items you mentioned in terms of income credit etc is all something i qualify with and have reserves, i am just trying to do a refi cash out on my "5th" loan....maybe its not possible

Alex J. MBA, EA, LArentsite | [email protected] | http:///www.larentsite.com

I think what you probably want to do is go for a commercial loan as was mentioned in #2 above. You can bundle several of the properties together. Biggest downside is it will probably be a 20 yr amortized loan that resets in 5 or 7 years. Good news is the interest rates are really good on them now and the banks are very anxious to make these type of loans.

Find a couple local banks and call up and ask to speak to the commercial loan officer and tell them what you're looking for and see what they'll offer.

I'm not sure you would want to "bundle" several properties together to do a commercial loan. 

Bundling in real estate is cross-collateralizing real estate assets under the umbrella of one loan. One loan  experiencing one problem equates to way to much risk and a possible loss of more than one property.

I know people who do LOC's to gain cash buying leverage and these loans are personally guaranteed. One blip and phooph everything the own is at risk.

While cross-collateralizing properties isn't the same as an LOC it does have the same consequences against the asset securing the loan should problems arise during the loan term.

I don't really think id want to go the commercial loan route with a floating rate because i am of the mindset that rates are going to be higher in say 5-7 yrs from now and want to lock in cash-flowing properties for the long term.

if i were to do an LOC and say use that money for 6 months can i go back and do a refi on the duplex then to pay that debt off?

Alex J. MBA, EA, LArentsite | [email protected] | http:///www.larentsite.com

Alex Janos I bumped in the same problem recently :((( the best offer I received - to make a portfolio loan - to replace all my fixed rate 30 years mortgages with one 5 years arms :))) I am not sure if I want to pay this price for some cash out :))) BUT it looks like I found a right broker now, they operate all over the states and they have a reasonable rates. I am just starting with them and I will let you know