Alright BP heres a question for you.
Recently heard a podcast and this guy states starting off with portfolio loans from the get go is the way to go. My plan is to acquire 2-4 unit properties in Milwaukee. I will be using a HELOC to pay for them and will be using the delayed financing exemption in order to continue acquiring more properties.
Will using portfolio loans work for this strategy? How much higher will my interest rate be? Whats good and whats bad about portfolio loans?
GOOD: Much easier to get financed after you purchase. If you buy with cash or money from a HELOC, but don't do the delayed finance exemption, you may have to wait 6 months to cash out. Also, you may get more cash out than with the delayed finance exemption. With portfolio (may be considered a commercial loan--residential type loans are considered to have a limit of 10), you can get more than 10 mortgages. With Fannie, you will max out at 10. Another good aspect is that it may not matter if you are titled in an LLC. Fannie loans need to be titled in your personal name (some folks do a quit claim to LLC with Fannie loans, but that may trigger a due on sale, although a rare possibility). Typically, these loans carry a much lighter documentation burden than Fannie loans. Many banks that have Fannie Mae loans are just outright ridiculous on what they want you to provide.
BAD: Higher interest rate. Perhaps a percent higher or more. Terms will be different. Some banks do fixed for only 5 years, then the rate will adjust. Shorter amortization-some 20 years, some 25 years. Some will make it a balloon payment type mortgage after a certain number of years. Rates and terms will vary among lenders.
RECOMMENDATION: If for long term buy and holds, I recommend you go after the cheap money with Fannie Mae until you hit your tenth loan. You can get lower interest rates and 30 year amortization. If for short to intermediate term holds, then portfolio will be much easier to deal with.
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