How to finance a Portfolio deal?

9 Replies

I'm looking at a portfolio deal with 3 properties (10 units total). The seller isn't interested in owner financing so I'm looking to get a loan but I'm stump on where I should start looking. I heard about SBA 7a and Freddie Mac but I'm not sure if this would qualify as it's multiple (residential) building (all less than 4 units). 

What are some of my other options?

@John Moon

Given the information above, I believe you have two good options: 

1) Finance all three separately on conventional, FHA financing (under 4 units)

2) Approach a local bank on the deal. They most likely won't allow as high leverage as FHA in (1), but they'll be used to "unique" situations.

What are the property values? 

If you didn't want to go the individual route you can get a portfolio loan however expect rates to come in around 6% sometimes as high as 8% depending on the situation 

If you qualify for conventional Fannie/Freddie loans that will be your best long term option for 4plex's.

If you don't then you'll want to get a commercial/portfolio loan either on each property or bundled together.

@John Moon Bridge lenders should be able to provide short-to-medium term financing (6 months to 3 years). This can allow you to sell an asset, improve your personal balance sheet and/or be in a better position to get conventional financing. 

@John Moon This is a very typical commercial loan. Talk to your local banks, tell them what you want to do, and they can easily tell you how to do it. You will need 25% down. They will loan you 75% of the purchase price. You should be able to answer basic questions that they have such as who will manage the property. You will need a personal financial statement and provide two years of your personal tax returns.

Originally posted by @Justin Wai :

@John Moon one thing to think about too, is if you get a portfolio loan, what happens if you want to sell just one of them? or two of them?

 You can sell individual properties from the bundle. You would need to get a release from the lender. The closing attorney would wire funds to the lender for the release amount and they would clear the deed for that specific property.