Portfolio Loans for Single Family Rentals

14 Replies

Hi All,

Thanks for making Bigger Pockets a wonderful community where I learn something new every day!  I was hoping to get some advice about portfolio lending for single family rentals.  To give you a quick background, I'm a working professional with a W2 income, investing in single family rentals in the Philadelphia area.  I have 6 rental properties (profitable) and all of them have been 30-year fixed mortgages.  As I'm getting close to the 10 loan limit (I have 7 loans including my primary residence), I'm hoping to expand my portfolio in the next 2-3 years, and therefore trying to figure out what my options are for obtaining loans beyond the stipulated limit of 10 loans.  

I have heard the local credit unions may be willing to provide portfolio loans.  I have a few questions: 

  • Based on your experience, are credit unions my best option?  Are there any other sources that I could tap?
  • And if so, how do I go about approaching these credit unions?  Do I need to share some sort of P&L to show them that all my properties are profitable?  
  • Do you have any tips of how to get the best loan terms and interest rates from the credit unions?  
  • Does anyone recommend a particular credit union in Philadelphia?  Any advice would be super helpful.

Thanks in advance for your help!

Niti

Portfolio lenders are tough to find, but they are out there so keep looking. Look at credit unions and local banks (2-5 branches). You say each property is profitable, put them through the BP calculator and print them; now you have actual number to show a lender that they are profitable. Also create a balance sheet that shows property value, loan amount, int rate, total payment,principle payment, int payment, insurance payment, and LTV (let me know if you want an example). A lender can look at the balance sheet and make a quick decision, then dig into each property if they want. Also have past two years of taxes and be ready to provide two months bank statements of business and personal checking accounts.

If you can't find a local portfolio lender, there are some national lenders that will lend on 5 or more properties. But, these are commercial loans; higher int rate, lower LTV ratios. Check out RCN Capital.

Let me know if you have any questions. Good luck. 

@Niti Palak

I would second what @Loren Davy said above. I found a 'regional bank' that holds these loans in house. VERY easy to work with. Our lender loved the BP Rental Calculator report :-) We were buying through LLC, so a little different but not a whole lot. We met our guy, who is about 1.5 hours away through our 'landlords association' which covers a big chunk of the middle of our state. That might be worth looking into as lenders that are members are obviously looking for investors.

We were also doing some 'non recourse' loans for some properties we were buying with our SOLO401k at the same time and those were a TON more paperwork and hassle.

Dan Dietz

Thanks @Daniel Dietz ! Good to hear that regional banks are easy to work with. Will definitely check out the BP rental calculator. On a side note, you mentioned that you were buying through an LLC. If you don't mind me asking, did you get less favorable loan terms because of it, or did it not make too much of a difference? Every time I bring up using an LLC with my current lender, they tend to dissuade me citing unfavorable loan terms as a reason.

@Niti Palak we actually didn't even talk to too many other lenders, as the ones we each worked with on the properties that we own individually (the LCC is 3 partners) to get "30 year fixed loans" made it clear that they didn't deal with LLCs or 'commercial loans'. 

Our rate earlier this spring was 4.5% fixed for 10 years and a maximum increase of 1% a year in years 11 and on, with a 25 year amortization. My daughter was doing a loan for her own how at the same time and think she got about a 3.75% or so for a 30 year fixed. 

Even though even that little precentage adds up, the simplicity of working with a portfolio lender is worth a lot too. 

Dan Dietz

@Niti Palak i vote Portfolio lenders as well, but i would suggest staying away from big-banks and credit unions. 

You mentioned they were trying to talk you out of holding the properties in an entity/ LLC claiming unfavorable terms. Seems to me it would be unfavorable to them as they may not be ABLE to close a loan in an entity.

There are loan-types out there, and portfolio lenders, who have no problem with an entity owning the properties, and will finance the properties mainly based on the cash-flow; not your ability to repay. There are specific parameters you'll need to hit, such as minimum loan amount, minimum number of properties in the portfolio, and the location will have to have a certain population density in order to be considered. But it would avoid tax returns/ income verification, and would allow you to release the properties from your fannie/ freddie 10-cap. 

Yes, the rates may be a bit higher than the conforming loans you're accustomed to, but if the intention is to continue acquiring through traditional financing methods, a portfolio is a great option to free up your cap and keep investing. 

You can reach out to @Alex Bekeza , he can run some numbers and possibly find you a lender to meet your needs. 

@Niti Palak I know Caliber Home Loans here in Texas/Louisiana has a portfolio product that they hold internally and does not count against your 10 limit. Not sure if they operate in the area you are investing in though. Otherwise, introductory calls with local credit unions in large metropolitan areas would be a good start. 

Hi Niti

Have u been able to find any portfolio lenders? Pfcu can do loans on llcs for cash flowing properties at 3.25% more than 10 year treasury. All this for 20% down. However, the problem is that they can’t match multifamily loans which are 2% more than 10 year treasury. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here