Cross Collateralize Free and Clear Property to purchase 4 unit

11 Replies

I am writing an offer on a four unit tomorrow in south east Wisconsin. I am looking for the most economical way to leverage a free and clear duplex I own (worth appr 120k) to cover the down payment (appr 35k). Obviously I can cash out refi it and get conventional financing. But then I have to pay closing twice. Unfortunately the private lender I had has stopped lending which would have made this easy. I am  wondering if there are any banks or hard money lenders in the MIlwaukee, Kenosha, Racine area that would do a cross collateral loan and if there fees and terms would be more economical than the traditional route. Thanks BP nation for any help on this.

What’s the purchase price of the four unit?

I have little experience,  but you should be able to open a line of credit against the property.  I would call your bank and ask them.  If it doesn't work out with them,  call a few more banks and ask. 

Best of luck!

@Ray Thorsen - Do you know anyone else with private money who would lend you at least $35000 on your first property with minimal fees? Ie pitch a private loan on the marketplace on either your first or second deals.

@Ray Thorsen Yes, you can do that, most small banks with focus on business will do that. 

However, here is the catch: If you cross collaterize you will end up with a 5 year commercial ballon product with higher rates. Often amorized over 20 or 25 years. That means less chash flow. And then in 5 years you'll have to look for another loan, most likley in a higher interest rate environment! The best loan by a long shot to buy the 4fam is a 30 year fixed secondary market product with low interest rates and a 30 year amortisation. 

Keep it simple and focus on low interest rates and long terms, get a 30 year cash out refi on the first one and then put down 20% on another 30 years fixed rate low interest note. 

@Doran Summers the pp is 140k

@Kole Kingslien I am trying other banks, I was hoping someone hear could save me some time calling.

@Marcus Auerbach I agree with you about sticking with standard resi financing. I may be trying have my cake and eat it too but thought I would reach out and see if any one was aware of a bank willing to do it.

The one thing I forgot to mention is that I am going to try to BRRRR it. It needs 30k in repairs. WIth an ARV of 220k I should be able to get most if not all my cash back. But that would be another closing and there associated fees.

it depends on the terms. I am not opposed to hard money if it saves me hassle and money. 

Honestly it depends on your credit score. If it’s 660 there’s a few lenders who can do it for 6.45%.

@Ray Thorsen ,  you could try American Mortgage Equity Consultants, Inc. It is a lender out of Madison that I found some favorable terms with, potentially 15% on an investment loan, and they might be able to wrap in the repair loan as well, Josh Nelson, you can find his info online. I don't know if they will be able to open the line of credit through your property though, for that, maybe try looking up southern WI portfolio lenders, I'm not sure if they could do something like that, but that's what I would try, if anything else, try asking for a sales manager, they should be able to point you in the right direction, they will be pretty use to working with investors and may have the answer to your question. 

Good Luck!


@Ray Thorsen I agree with @Marcus Auerbach if you are able to get long-term financing today that what you should do. I have a contact with a lender that will close on both properties. 

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