Investor · La Grande, OR · Member since 2014 · 194 posts · 176 votes
Hello All,
Quick question for clarification. After I reach my max of 10 government backed loans (almost there which is why I am asking) do I have to start looking to credit unions or commercial institutions to refinance my BRRRR deals? I just wrote an offer today on a home that would out me at 10 loans (I own several other properties outright, Thanks Dave Ramsey) so I am wondering if I can continue doing this, or need to transition to a different type of investing.
San Francisco, CA · Member since 2015 · 786 posts · 717 votes
10y
One option is to 1031 10 green houses for one red hotel (an apartment). And now you've paid off all 10 mortgages, own an apartment and do it all over again.
San Francisco, CA · Member since 2015 · 786 posts · 717 votes
10y
One option is to 1031 10 green houses for one red hotel (an apartment). And now you've paid off all 10 mortgages, own an apartment and do it all over again.
Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
10y
@Mike Sattem Another option is to find a portfolio residential lender. Yes, they are out there. These lenders don't have the restriction for 10 max loans. They can keep going as long as you have the money and the deal makes sense. Of course the rate is a bit higher (much lower then hard money) and cash reserve requirement higher. But the advantage is that you can get a 30 yr fixed loan. If you go commercial, then you have to deal with balloon payments and rate reset.
I would look for a portfolio lender in your area. This is usually a small local bank that keeps their loans in house. You can get all your properties under one commercial loan if you wanted to. I would start by calling all the local banks in your area and talk to them about what you want and what you have already done. I would also start putting together a business plan to provide to the bank once you find the one that fits your needs.
Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
10y
I would actually suggest that you leave the 10 loans you already have in place. I'm sure they're great loans (30 yr fixed with great rates).
But when you go to refi as part of your BRRR, instead of getting a conventional loan, you just need to get a commercial loan. And thats where I would follow Ryan's advice above. Call all the local banks and ask for the commercial loan department. Then describe your situation (i.e. 10 financed properties and over the conventional limit) and let them know you're looking for a commercial loan to do your refi's.
Explain to them that you understand it will likely be 5 yr balloon, amortized over 20 or 25 years. That will clue them in that you want a commercial loan so they don't push you over to the residential side.
But I would clarify that when we say "local" banks, it is meant to signify local banks with smaller footprints. So if you have a BofA a couple blocks away, that is technically local to you. But the national/larger chains don't do these loans.
Sometimes their reps will tell you they do. But thats usually because they don't know their own guidelines. And when they get into the weeds with their underwriting, you'll find they were wrong.
Stick with the smaller regional banks. Even some of those may still not have this loan product. But - at least by me - many do.
The key is to get someone in the commercial department.
Investor · Fort Collins, CO · Member since 2015 · 304 posts · 112 votes
10y
@Mike Sattem I have found that if you establish a good relationship with local banks, and you have a proven track record you can sometimes control the terms of your commercial loans. Such as longer amortization, longer balloon, lower origination fees, etc.... all contributing to a better bottom line for you. However, this really only works if you use them for more than one loan. Just a thought