Cash out refinance (more that 4 financed properties) and portfolio lenders

12 Replies

Hello,

I am trying to find a solution to do a cash out refinance on a property in Nevada purchased 2 years ago, recently appraised for $192k and that does not currently have any mortgage on it.

Because I own more than 4 financed properties, I cannot go the conventional route because Fannie/Freddie rules do not allow cash out past 4 financed properties (or so I am told).

Now to my question: I know that I am supposed to talk to small local banks and find one that keeps loans inhouse (portfolio lender) so they do not care about Freddie/Fannie. I have spoken to several local banks, and I always end up with their commercial lending department, and the longest they will fix rates is for 5 years. For example several banks offered a 10 year loan with a rerate at 5 years.

What I would like to know from people that have already done this, is whether it is realistic to find a local portfolio lender that will offer a 30 y loan with a rate fixed for 30 y, or is this only possible thanks to government involvement on conventional loans?
There are still dozens of more banks I could call, but if 30y fixed doesn't exist in the commercial loan space, then I don't want to be wasting my and their time...

Thank you!

Jean

PS: I am aware that B2R is working on a 30y fixed, single property program, but it is not ready yet, and First Key may offer something like this but they do not lend in Nevada. I'd be happy to learn about any other national lenders to talk to.

A good exercise for anyone is to call every single small bank is available, and see if they will do 80% loan to value on acquisitions.

If you have a business plan that shows that you buy fix and hold, and you only want 80% of value in a reasonable interest-rate, they may accommodate you 10 20 or 30 years

Just search for portfolio lenders that will work with you has a lot to do with two things: one is your persistence and two is how organized and professional you are

Get a business plan that shows that you're for real and show every single deal you've done

The alternative is to get private lenders that will lend you 80% loan to value in long-term

If you have trouble, you can always take a hard money loan for 6 months, then just do a regular refinance.

For your future reference, if you pay cash for the 5th through 10th properties, you can cash out within 6 months of the purchase. After 6 months, you can only refinance existing debt. This is the delayed financing rule that many aren't aware of.

I've yet to find any portfolio/commercial lender that will do 30 year fixed.  Conventional (Fannie/Freddie) is about the only source of 30 year fixed.

@Jean G.

You're on the right track if they're sending you to the commercial lender at the bank. Even though it's not a commercial loan, their retail lenders are all just going to offer the Fannie/Freddie options. 

I don't see much of a problem with getting a new loan every 5-10 years if the money is good. You are still maximizing leverage, and the money ought to cost something! My suggestion though is that you see if a commercial lender will give you a line of credit on the property. You didn't say why you want the cash, but my guess it's to buy more real estate! The credit line will still probably only have a 10 year term (sometimes you can borrow for 10 years and then you have an additional 5 or 10 yr period to pay it all back) but there are some huge advantages. 

  • Many banks will charge very low or no closing costs on a credit line
  • You only have to qualify for the credit line once - if you're flipping or cash buying and refinancing, you can rinse and repeat without even notifying a lender!
  • Though the rates aren't fixed, you only pay interest on the cash you're using. That way you only have payments when you are actually using the credit line, and any additional cash flow can just go right back in to paying off the line.

This is pretty much the infinite banking concept, but with SO much more control. The property is throwing off so much more income than a bank account would, so why not just become the bank?

BTW, First Key's single family investment portfolio is out of business. I used to offer their portfolio myself. But word is the whole bank is done.

@Robert Sepulveda

 Thanks a lot for the info on the conventional underwriting guidelines. The one lender that declined to do a refi on a 2 year old transaction didn't tell me that it would have been possible within 6 months. That's good to know.

@Skyler Smith

Yes good idea on the LOC. I actually also asked around about this but didn't find anyone offering this with decent terms. I guess I just need to call more banks. There are plenty where I am. I'll just call 2 or 3 every day...

But I still need a solution to refinance out of each cash purchase, ideally with a decent 30y fixed rate...

@Darren Eady

I filled out a lead form with Peak Asset Lending but the brochure that was auto-emailed to me talks about 3/1 ARMs (so it's possibly a 30y loan, but interest resets after 3y). I'll see if I can find out more when I talk to them...

@Skyler Smith

I was reading some of my notes of previous calls with banks. What type of rate should I expect for a LOC? I show several banks that offered 5+% rates on real estate secured LOCs, yet US Bank has a 5 year term loan with a 1 year rerate (in other words an ARM) that starts out around 2.25% at current rate levels.

So if US Bank can do that on a term loan, shouldn't I expect to find LOCs at similar rates, or is it now how it works?

Hey @Jean G.

~5% is about what I've been getting quoted these days. 2.25% sounds like it might be for owner occupied homes only or something? It might not be unheard of on a 5 year for an investment property, but like I said that's not been my experience. I've been in talks with our local US Bank commercial lender, they seem to have some cool programs available lately.

The Grant Cardone podcast with Brandon and Josh goes over some of the commercial financing the top dogs are getting their hands on. He mentions that he's getting FNMA loans with nice low interest rates, but it's like a 15-20 year am with a 5-10 year term.

http://www.biggerpockets.com/renewsblog/2015/02/05/bp-podcast-108owning-350-million-real-estate-10x-rule-grant-cardone/

The Grant Cardone podcast with Brandon and Josh goes over some of the commercial financing the top dogs are getting their hands on. He mentions that he's getting FNMA loans with nice low interest rates, but it's like a 15-20 year am with a 5-10 year term.

Thats multi family.