Hitting financial lending challenges with over 5 properties - options?

12 Replies

I have 3 single family rental investment properties, a primary home and a 2nd home (all financed).

I am looking to get the equity out of my 3 investment properties to use to purchase more investment properties. It appears that options are limited with no HELOC and Fannie refi-cash-out when you have 5 or more properties. Investment properties currently have two 15 yr fixed 3.9% and one 30 yr fixed 5.5% now conservative potential to get about $150K pulling out equity from all three).

I have a couple of options that I have been presented with:

1) pay off one house in short term and then refi cash out the other two

2) portfolio loan for all 3 properties (this is 7% ARM which is reevaluated annually so if interest rates remained the same would probably go down to 5% in one year)

3) commercial lender with balloon payment in 5 years

My goal is to acquire another property every year or every other year.

With the limited information I can provide in this post, would you recommend any of these options or any other I do not have listed?

Thanks - appreciate it everyone!

Phil  

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A portfolio loan won't help you get more Fannie loans.  They count the number of encumbered properties, not the number of loans.

You will have to get comfortable with commercial if you want to go big.  Or get partners to put the loans intheir name, but then you have the only ship that doesn't sail....

A small portfolio lender might go up to 10 loans.  They don't sell them to fannie, but do underwrite to those standards. 

If you want to get big, you'll need to speak with a commercial lender about getting a loan made to your LLC.

Jeff, David and Zoran,

Thanks for the information.  I guess I need to decide whether to jump into the commercial loan arena or wait until I get 10 properties.

Depending on how the numbers work out it may not be a bad idea to start forging the commercial relationship.

Thanks for your feedback - appreciate it!

Phil

You should be able to find commercial loans with rates in the 5s and the balloon payment in 10 years or so. They will lend to your LLC with you as the gauruntor.

There are a few lenders that allow more than 10 financed properties.  Talk to a local broker and see which Non-QM loans they have available.

I have been using Impac's investor program lately, AltQm Investor.  purchase or refi, unlimited properties (only 8 or $2 million with them), 75% LTM,  680 mid score, cash out up to $350,000.

I only do loans in OR and WA, but assume the program is available where you are.

Matt and Robert,

Thanks for the information guys! I will look into those options!

Phil

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Yes, Global Debt Service Ratio matters.  Earlier this year, I experienced this with CU.  Don't give up.  Look for other options.(small local banks)...Network, Network...find a way to keep it moving!!!

Thank you Bob and Rolanda for your guidance and responses.

Bob - I would like to speak with you further about this option.

Rolanda - Thanks for the encouragement. I am still working on a couple of local banks, but they are so conservative with low LTV refi cash out deals, high rates or high points. One even wants me to keep my cash out from the refi in an account in their bank and only let me use MY cash on their approval - I don't even know how that would be done contractually - unreal!

Onviously as others have stated, start working with a small bank who lends for their own portfolio.

My question is why not be creative? So you have a $150k in equity. Go after deals where you can finance 75%LTV with a small bank loan and give the seller (or a private lender) a note secured by that equity for the balance and do 100% financed deals.

That's just one example of what you could do....

Brandon,

Thanks much for the advice and example scenario.  I'll try to pursue that option and try to think about some other creative ways to get it done. 

Thanks.  

Phil

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