Portfolio Loans - What kind of numbers are you getting recently?

Question

So i'm at the beginning stages of two duplex BRRRRs in the Cleveland Ohio area and evaluating my options on the finance side.  I've already done plenty of research on the conventional, Fannie/Freddie side of things (couple grand in closing costs and rate between 4.5 - 5 with no points) but noticed quite a bit more variance with the portfolio lending side of things.  I've seen some pretty crazy numbers, almost like HML and I'm curious to know what others are actually getting.

My biggest dilemma is deciding between waiting the full 6 months before pulling equity back out, or pulling it all out within a month or so of close, pay a higher price (APR and points) but have access to the cash again with the option to do a rate/term refi down the road.  The cost of a portfolio loan seem to make the question easier to answer, but there may be some lower costs stuff out there that I have not come across.  This is why BP is so amazing : )  Thank you in advance!

Andrew Postell · Answer

@P.J. Bremner then my recommendation would be to seek out small or medium sized banks in the area of the properties.  Speaking with those lenders will have the most accurate numbers you are looking for.  Portfolio loans run the gambit.  Most portfolio lenders will have a 15-20 year amortization with a 5 year ARM rate.  On a duplex it might range somewhere from 5.5%-6.5% on a loan of that nature.  Again, that is an adjustable rate.  Many portfolio lenders will also have pre-payment penalties and even loan minimums (many have a $100,000 loan minimum). Since each portfolio loan comes from the bank's own money, each bank could have entirely different loan terms and parameters.  So speak with multiple banks to learn the differences. Also, keep in mind that they will still require an appraisal on the property.  Hope this helps.

Chris Mason · Answer

To be perfectly honest, when I don't have paperwork in-hand, I tend to quote our "worst case" portfolio product too.

"Best execution" portfolio residential non-jumbo loans for non-owner occupied that I see here in California are 30 year amortization "high 4s, low 5s," but maybe 1 in 7 people actually qualify for that particular portfolio product once I have paperwork in-hand and start shopping it, which means 6 out of 7 times someone will feel that I bait-and-switched them. "Worst case" that I see is about what you were quoted.

Because these aren't Fannie/Freddie or jumbo, there's no algorithm where we can say "what does your __________ paperwork say?" and give you an accurate answer. A mortgage broker needs the full credit package in-hand to shop it, because many of these portfolio lenders want to see that before giving us an answer - 2 or 5 days later.

Quickest way to be time-efficient with brokered portfolio loans, as a lender: always quote worst case, and only shop it for that small minority of investors who will send paperwork in on that pretext. They will not be pissed when you quoted them 8% and 2 points, then come back with 6.5% at 1 point once you have the paperwork in-hand (& they will utterly love you if they are that 1 in 7 and you come back with "best case" type portfolio financing), but they will be pissed if you quote "best case" and then come back with 6.5% at 1 point once you have paperwork in-hand.

Portfolio loans take, easily, 5 times as long to shop, and a mortgage broker can't shop it without all paperwork in-hand, which is generally defined as all the standard FNMA paperwork PLUS things like 24 months of bank statements and YTD P&Ls, etc, that some portfolio end-lenders prefer in lieu of standard FNMA paperwork.

Good luck.

TLDR: "Portfolio Loans - What kind of numbers are you getting recently?" - anything from 4.5% to 9%, anything from 0 to 4 points, anything from 3/1 ARM to 30YF, and it's up to you where in that spectrum you fall more than anything else. Portfolio loans filling the gap between Fannie and HML are a risk-based rational non-algorithmic marketplace requiring full docs & doc-based shopping to get accurate numbers. No docs in hand = HML-like rates/terms because in the world of portfolio loans it's assumed that "no tax returns" = "he's not showing tax returns because they show him as having no income" and "no bank statements" = "he's not showing bank statements because he has no money." One little irrelevant paperwork imperfection might cost you 0.25% to rate in Fannie world, but it's going to cost you - easily - 2% to rate in portfolio world. At some point, if there are enough of these "irrelevant paperwork imperfections," it's going to basically enter the gray area where we aren't sure if we should be calling it a "portfolio loan," or a "hard money loan," because of the rates/terms/points/etc, in which case you should just skip the hassle and get a true hard money loan.

Andrew Postell · Answer

@P.J. Bremner if you bought with cash you can get cash out right away with a conventional loan.  No 6 month waiting.  With a duplex you can receive the lower of 70% LTV (which is the maximum cash you can get with a conventional loan, cash out, on a duplex) or your purchase price + your closing costs when you purchased the home.  I don't know your numbers specifically but does that change anything for what loan type you are seeking?

Avi Garg · Answer

Thanks @Daniel Dietz ... I have properties OOS and I looked into WI as well ... I will give him a call and see what he can do if I buy in WI.

Daniel Dietz · Answer

@Avi Garg it is Paper City Saving in Plover WI, but I am almost sure that they only lend 'in the area'. We are about 90 miles away, but in a rural area that is not real that far. The guy we deal with is David Cooper it you wanted to make contact and see if he might happen to know lenders out your way that offer similar.

Dan Dietz

Avi Garg · Answer

@Daniel Dietz Would you mind sharing the lender name via PM

@P.J. Bremner I will PM you

Jerry W. · Answer

My last one was 5.25% on a 15 year note with a 5 year ARM being help in a corporation.

P.J. Bremner · Answer

So I want to bump this topic to see if anyone could help me out some...

I've literally called 30+ banks in the Cleveland and Lakewood area and found one that offers portfolio loans, but they do not lend to out of state investors.  It's against their guidelines apparently lol never heard of that one before.  I have heard from one person that can do a portfolio loan, but the numbers were way higher than what I'm hearing from others.  He was talking about 3 - 4 points to get 8 - 9% for 30 years.

Does anyone know of a portfolio lender that they use that lends in Cleveland/Lakewood?  I would love to speak to a bank or two that actually has a viable portfolio product for a well-experienced and well-capitalized investor.

Daniel Dietz · Answer

We are getting about 5.125%, 25 year amortization, 10 year lock and max 1% hike each year capped at 11.25%. 20% down which can be half our funds and half owner carried or private money second. The numbers have to show at least a 1.2 DSCR ratio.

Dan Dietz

Portfolio Loans - What kind of numbers are you getting recently?

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