Have 8 rental properties paid off, best way to borrow for more?

Question

Hello, I have 3 properties that I've owned for 3 years and recently added a package of 5 that gave me 8 total. They're all paid off and the value is give or take $400-450k. The total rents generated will be $6300/month so $75,000/year give or take. I dont have a full year of rents including the new properties, just 1 month so far since I bought the group. Im short on cash now, but what is the best way to borrow to add more properties with the scenario I have separate from my work income.

Chris Mason · Answer

Hi @Brian Person, Levi T.,

Can you guys clarify what you think this is a commercial scenario that can't go residential?

Hi @danny n,

From what you've described, I believe this could go the route of Fannie residential financing. Find a REI friendly lender in Texas. Cash out refinances, boom there's your down payment. It appears you have less than 10 financed properties, so boom pair that down payment with residential 30 year fixed rate financing for your next purchase(s).

Make sure that when you do your Schedule E on your taxes next year, you are accurate with "fair rental days." Some CPAs will be lazy and just always put 365 in there, even though you only owned the property for a fraction of the year. Also ensure your leases have nothing crazy in them (no 'rent to own,' no violations of fair housing, etc), as an underwriter looking at "fair rental days" and seeing 45 or 60 is going to want to go off of the leases, not Schedule E.

Alex J. · Answer

cant you just refinance /cash out one of the older properties ?  if you own them out right i would imagine you should be able to do this?

Marty Johnston · Answer

Danny, we do have loan program's in Houston and all over Texas. Im away right from my desk right now but Ill PM you later this afternoon with some more information and my contact info. Enjoy the slopes my friend!

David Krulac · Answer

@Danny N.

The cheapest money is fixed rate 30 year mortgage on your personal residence. (maybe 4% fixed for the next 3 decades).

The quickest money is hard money maybe as much as 15% plus 5 points.

In between might be some private money.  The lenders there are people that know and love you, including friends and relatives.  Perhaps even from their retirement IRAs or 401K (if self directed).

Another alternative is to get either an equity partner or a loan partner to provide funding.

If you have the deals the money will come.

Danny N. · Answer

Hey Marty, do you do loans in Houston? That's where I am. I actually would like to get into fix/flip next. To this point I have focused strictly on the low end of the market and the ROI is spectacular without a doubt but I was put in touch with a great local wholesaler who sends me homes in the $150-300 range daily with complete info on whats needed and costs involved and seems like 15% is doable on those types of homes. Id like to give that a try and I have my income from work + these paid off cheap houses generating rents to help. I just do not have the $150-300 in cash, I have the cash for repairs ready but id like the ability to buy one of these homes and they sell very quickly so I dont have time to get conventional mortgages.

I cant call today bc Im on a ski trip with some friends till tuesday but id love to discuss it with you if you do texas. Thanks

John Thedford · Answer

Try portfolio lenders if you are not seeking a large LTV. I think their paperwork will be less cumbersome than a bank's paperwork.

Marty Johnston · Answer

@Danny N. Greetings and congrats on your recent investments! It sounds like you have solid investment footing here. I'm a commercial lender and would have happy to talk over your options with you. Send me a PM with your contact info and I'll get back to you asap. (After the Packer game of course! - Let's hope we don't repeat what your Texans did to us...)

Anyways, There are programs out there that will allow less than a full year of rental income, it's finding them and understanding your rates and terms. You bought this package deal of 5, what's next for you? More SFR's? Keep us posted!

Marty J

Levi T. · Answer

Go talk to a local commercial lender, they can lean new deals on those properties when they do the loan for new deals, later on you can get the leaned deal appraised and un-lean it, and release your equity on the first set to go buy more.

Have 8 rental properties paid off, best way to borrow for more?

Most Popular Reply