Portfolio Loan based only off the income of the properties?

Question

I’m curious if anyone has had success in refinancing 4+ seperate properties based off the income they produce rather than going and getting appraisals on each property. Currently we’re operating at about an 11-12 CAP and I think the market in the area is typically around an 8-9 CAP. We’ve recently purchased two properties that are rehabs and upon renting them out will need to refi them so looking ahead, I’d love to get everything under one loan and refi out as much as I can.

Upen Patel · Answer

@Mike Abramowitz For residential properties (1-4 unit) there is no way around getting a full appraisal and basing the loan on the appraised value.

Bob Green · Answer

Mike,

Yes, appraisals will be required. One issue I see is most local commercial banks will not lend to out of state investors. However, in the unconventional lending world this is definitely feasible. Typically, a blanket mortgage in my world is a 5 or 10 year balloon/30 year amortization. If you refinance them as individual loans a 30 year fixed is available depending on loan size.

Chris Mason · Answer

Residential side:

In theory if you have zero consumer debt and net rental income is 2.5x your personal PITI/rent (net rental income after the new mortgages), it can work with no job income.

Appraisals will still be needed.

Commercial side:

There are blanket commercial mortgages. Appraisals will still be needed. Assume: ARM, 20-25 year amortization, higher rate, periodic re-underwrite of all your financials.

Max Taylor · Answer

@Mike Abramowitz, the others are correct, you'll need to do appraisals. Are they in Somerville? If so I would welcome the sales comp valuation because its going to be high.

Not sure what your business plan is, but the other thing you could consider is selling them all as a package. Since they're performing well you could probably make a nice spread and then 10-31 into a bigger building or another portfolio that needs some love. If what you buy is 5+ units, you can then do a portfolio loan the next time around.

I understand the notion of wanting to buy and hold, but you'll end up making more if you keep trading up.

Josue Velney · Answer

@Mike Abramowitz Two of my properties in Springfield are under a blanket loan. CT is not too far from Springfield let me know if you need an introduction. Keep up the good work!!

Mike Abramowitz · Answer

Interesting, didn’t know out of state commercial loans become an issue. My partner is actually in state in this situation so if we did take that route we could make it work, but definitely a great thing to know moving forward

Mike Abramowitz · Answer

Thanks everyone for the input, I had figured as much but was hoping otherwise....

@Max Taylor -- I'd kill for an 8-9 Cap in Somerville, let alone a 12 Cap, unfortunately they are all in CT... I'm trying to break back into the Greater Boston Market, but its just so hot still that nothing makes sense for buy and hold. I've picked up all these units in the last year or so and don't think is the right time to sell/trade up as capital isnt a huge issue, and I've been searching for something in the 1-5M range where I'd be comfortable investing and can't find anything that really excites me. So in the meantime, we've been snagging smaller multi's (admittedly also working towards gaining confidence to go big)  and keeping our eye out for some bigger fish.

@Bob Green -- These are all out of state from where I live currently (I'm in MA these are in CT), most recent property we acquired yesterday, oldest is about 3 years ago.... most were acquired in the last 12 months pretty evenly spread out

Bob Green · Answer

Mike,

When did you acquire the properties? Are they located in your state or out of state?

George Despotopoulos · Answer

Hey @Mike Abramowitz -- where are these properties located?

I would say almost all lenders will require an appraisal, especially on a cash-out.

Stephanie P. · Answer

@Mike Abramowitz

Sorry, but that won't happen.  The lenders in that space use the sales approach for each individual property, but the also take the income approach to determine DCR.  They need an independent third party (appraiser) to determine comparable market rents.

Stephanie

Portfolio Loan based only off the income of the properties?

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