Cheapest money if you have 10 conventional resi loans already?

Question

Any advice on obtaining the cheapest money if you have 10 conventional residential loans? Our loan broker in CA told us rates would likely increase 100 basis points as FANNIE and FREDDIE won't buy them. Is this correct?

Thanks,

PK

Thanks,

PK

Kevin Romines · Answer

Thanks for the invite to the conversation @Naveen Kumar. Naveen is correct. Fannie Mae will count any properties that you have in an LLC that you own 25% or more of as financed properties and you will be capped at 10 financed properties.

Here are the ways you can structure things and continue to add to your portfolio while still using Fannie Mae loans. If you are married, each spouse can have up to 10 financed properties in their own name individually so long as they can qualify based on their debt ratio and credit.

There is no limit on the number of owner occupied and I think even 2nd homes that you can buy, so if your at 10 financed properties, you can go buy a new owner occupied home and turn your existing primary into a rental home.

If your serious about future growth then you really need to open a sub S or a C corp and move 1 or more homes into the entity and get portfolio or commercial financing on it. It doesn't even matter if you are required to personally guarantee the loans, because they are in these entities, they wont count in the 10 financed properties rule. Therefore structured correctly, you can literally buy as many properties as you want. Now portfolio / commercial lenders also have caps, but they tend to go to much higher caps. Also if you have 3-4 good portfolio lenders, you can cover just about all you would want to cover.

At some point along the line you might start looking at multi's as most do, so start gathering good info there as well. If you need help on that, just PM me. I hope this helps?

George Taylor · Answer

@Patrick K. Well my opinion on this is from bits and pieces I've gathered all over BP. So Fannie will only go up to 10 loans residential. My suggestion is to create and LLC, transfer them however you can get that  accomplished, and then get a blanket loan on al of them that aren't o/o. From a commercial standpoint, we don't care how many loans you have or how big your portfolio is. Once this is done either you can continue to follow the commercial lending side or continue with the residential program until you hit that magical number of 10 again.

Stephanie P. · Answer

Patrick K.

The lowest I've seen is 6.49% on a no income verification, no seasoning and no source of down payment product, but a lot goes into "cheapest money".  I'm sure you can find something with a lower rate that underwrites income etc.. fully (I just haven't seen it).

To compare apples to apples, you'll have to know points, underwriting and processing fees as well as the length of time it takes to close.

Stephanie

Jassem A. · Answer

Shop around with other lenders and see what they might be able to offer. I would expect you could find a mortgage under 5% with 25-30 yr term but it may not be a fixed rate.

Laura Kelly · Answer

Are all 10 conv loans on investment props?

Account Closed · Answer

Can anyone give me the names of these banks mentioned above?

Kevin Romines · Answer

Commercial loans and residential loans are two different animals. If the deals aren't structured correctly, you may be good to go an the commercial side of things, but in a position that you cant get residential financing. The best rates and terms are always going to be residential versus commercial.

My suggestion is to structure yourself such that you can take advantage of the residential rates for as long as you can and only when you need it, do you then switch the property or multiple properties to commercial or portfolio. By doing it this way, you are getting the best rates and terms available, for as long as possible. You are reducing your mortgage balance quicker in most cases and cash flowing better. When you do move them to commercial / portfolio, you should have a decent DSCR ratio, debt service coverage ratio and therefore get better terms with your commercial lender.

Shawn Ackerman · Answer

Hey @George Taylor  got your email thanks.  Just tried calling you.  Give me a buzz when you can.  Number on the signature.

George Taylor · Answer

@Shawn Ackerman I just sent you an email.

Shawn Ackerman · Answer

@George Taylor Do you lend nationally?  What are the general requirements?

Cheapest money if you have 10 conventional resi loans already?

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