My Portfolio Lender Won't Lend on ARV! Time to Find a New One?

Question

I moved my business banking to a portfolio lender about a year ago. My intentions were to build a relationship with this small, local bank in order to cash-out refinance some properties down the road. Basically what Brandon Turner just posted about on the BP Blog. He called it the BRRRR strategy.

Well, now I'm ready to refi, and I've been talking with the loan officer at the bank. He says they will only lend on either the purchase price or the appraised value, whichever is LESS! I have a property I purchased for $40,000 at auction that is worth over $100,000, but this bank will only lend 70% of $40,000. Obviously, this kills the BRRRR strategy.

Is this typical or do I need to find another portfolio lender and move my money there?

Matthew Schroeder · Answer

It is very typical for a portfolio lender to have a "seasoning requirement" (time requirement for you to have owned the property).

As an example, our portfolio lender in Denver will only consider the purchase price if we have owned the property for less than 1-year.  However, AFTER 1-year (i.e. after owning the property more than 12 months), they can & will lend based on the market/appraised value.

Jerry Padilla · Answer

Matthew B.

How many mortgages do you have? To cash out on ARV - conventional financing requires 6 months seasoning. You can do this on up to four mortgages. After you reach 5 or more mortgages, guidelines change and you have to get creative to cash out - rate and term refinance a private or HML, that than requires closing twice.

Here is some information on cash out refinancing, http://www.biggerpockets.com/blogs/5110/blog_posts...

I hope this helps to clear up your questions.

Matthew B. · Answer

I asked about the seasoning time, and told him that I've owned most of my properties for more than 12 months. The loan officer would only say that commercial loan decisions are based on overall risk and I would have to go through the application process before he could give me an answer. Why waste my time?

Thanks for the confirmation that this isn't typical. I'm going to find another bank and this time I'll ask about this very issue before moving my money there.

Bob Green · Answer

I'm with Brandon. Find another lender. Plenty of them out there with little or no value seasoning requirements.

Brandon Turner · Answer

Find another lender! :)

Kyle J. · Answer

How long have you owned the property? In my experience, if you just recently bought it, then what you are being told is pretty typical. Banks will usually require a "seasoning" period (i.e. 6-12 months) before allowing you to borrow against a new/higher appraised value. However, if you've owned this property for a longer period of time, then I would say what you are being told is not typical and you may want to start calling around.

My Portfolio Lender Won't Lend on ARV! Time to Find a New One?

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