Portfolio Lending

6 Replies

Hi BP,

I am curious to know about portfolio lending. I had a banker tell me about it. I am looking to cash out a hard money lender on a rental investment property purchase. The banker informed me that his bank is "true portfolio lender." Wasn't sure what that meant. What are the pros and cons that someone should be aware of with this type of loan program?

Also, are there any portfolio lenders in the Boston, Ma region?

Here is a definition of a portfolio lender:


To me, it does not matter if the lender keeps your loan or sells it off. You are still going to mail a check every month.

I assume the hard money loan is a short-term loan which is why you need to replace it. Therefore, you need a long-term loan, whether it be from a bank or private money.  It does not matter who gives you the loan, only that the terms are a good fit for your needs.

It's true that it doesn't matter whether they keep your loan or sell it.  What matters is if they keep it, and don't have to meet the buyers underwriting guidelines, they are free to determine their own.  That gives them flexibility to lend on a deal which might not pass muster by secondary market standards, but which makes sense to that local lender who knows his market and his customers.  

That's why it matters that they are a portfolio lender.

And yes, Caleb, there are several.  Probably even more than I know about.  Don't call the regional or large banks.  Call the small banks that you never heard of with just a couple of branches, and ask for the commercial lending department.  Ask if they keep all their loans in-house, which is a portfolio lender.  

@Caleb Charles  My experience with portfolio loans has been really good.  They typically have a shorter amortization, balloon payment, higher interest rate and bank wants a working relationship.  When I got my first few loans the bank made me transfer my accounts over to them.  It was a process but I was all in when they asked me too.  After I transferred my operating accounts to them they gave me a total of 8 loans they held in the bank.  

The biggest piece to the puzzle when you are in accumulation mode is recycling your capital.  The best and cheapest way is through portfolio lenders....

Frank R

Great insight on this thread

@Ann Bellamy   Hi Ann, thanks for the insightful information. So I take it, that it would be best to visit a smaller branch within the area who understands the market. Is it a problem to go outside the state? Especially @Neil Aggarwal  stated that it doesn't matter who writes the loan. 

@Frank Romine  Thanks, Frank! Did they give you 8 loans as a blanket loan? Also can you explain a little further about recycling your capital?

Well, it's not a problem per se.  But if a bank is out of state and is small, it is likely that they won't lend out of their area, whatever that area is.  

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