Portfolio loans or local lenders for out of state investors

14 Replies

Hello BP community, Has anyone faced a hurdle to obtain loans from local banks, because one is not a local resident? I purchased a rental property in Birmingham, Alabama and have contacted every local bank there and almost all of them do not lend to out of state investors. The only two banks I found out will lend to out of state investors would only do Fannie Mae loans. I could go that route and get the Fannie Mae loans, but I would like to purchase more than 10 properties. Has anyone had the same experience? Did you find any solution? I am aware I could hard money but interest on hard money start at 7+. I truly appreciate your input.

@Jonathan Franchini - The 10 loan limit will be with any residential mortgage lender with normal terms.  Your options are portfolio loans at 7%+ and a few points or commercial loans with 5 year balloons 

@Brie Schmidt thank you so much for sharing your thoughts with me. I was under the impression that rates on portfolio or commercial loans were lower than hard money. Do you have any experience with portfolio loans? If so, will you share your thoughts with me. I have a hard money lender that will charge me 2pts and 7.5%. I thought I could do better if I were to shop around. Thank you so much.

Hard money won't work because those are short-term loans. Are you looking for hard money loans or what other loans are you looking for if not Fannie Mae?

How many properties do you have already? More specifically, how close to the 10 limit are you? I personally would take all the Fannie Maes I could and then deal with what to do after the limits after that. You can find a portfolio loan at that point, but even if you couldn't, at least get your 10 Fannies in....they are the cheapest loans out there.

@Jonathan Franchini - There are many commercial lenders who could help you with either acquisition or refi or both and can blanket multiple properties.  Rates are certainly going to be higher than a bank but some can be as low as 5-6% range.  

@Jonathan Franchini

Residential loans - 30 year fixed around 5% - no points - up to 10 per person

Commercial - 5 year fixed around 6% - no points - only for LLC or business entity

Portfolio Loans - 30 year fixed around 7% - 1-3 points

My 30+ properties are residential (3) or commercial.  Every portfolio lender I ever talked to always have rates and terms that were not worth it to be

@Jonathan Franchini

I actively invest out of state and there are two important factors to consider:

1.  Banks will look at what assets you have and where they are located.

2.  Commercial property (5+ units) will be a lot easier in terms of getting financing because banks look at the income being generated from the property FIRST then you.


So if your investing in small residential properties, you will have further hurdles to deal with because YOU come first, not the property.

@Ali Boone Thank you so much for your input. I really appreciate it. I currently have 1 out of state investment property and three in the pipeline. I am also in the process of buying a property in CA as a first time buyer and that is why I do not want to lose my (1st time buyer) option going the Fannie Mae route on my investment properties. I will definitely go Fannie once I purchase the CA property. I want to get to the 10 properties by the end of the year if not sooner.  There many hard money lenders now offering long term rental loans (30 years). I am assuming this is because the shift in investments from flips to long term hold. The long term demand was great enough for them to create a product. Only drawback is the rates. They are typically higher. By the way, great website. Really motivates me. I want to get to your level one day.

@Ryan O'Mara Thanks for the comment. That sounds more what I am looking for. I will PM and inquire more about it. Thank you so much

@Brie Schmidt Once again thank you for the wonderful information. Are your investments in Chicago? I wanted to first invest in Chicago 3 years ago but had no boots on the ground.

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Originally posted by @Jorge Ruiz :

@Brie Schmidt @Ali Boone

Can you roll those over to an LLC and get 10 more Fannie Mae loans?

No, residential loans are on your credit, moving them to a LLC will not chanage the fact that you personally own the debt

Originally posted by @Jonathan Franchini :

@Ali Boone Thank you so much for your input. I really appreciate it. I currently have 1 out of state investment property and three in the pipeline. I am also in the process of buying a property in CA as a first time buyer and that is why I do not want to lose my (1st time buyer) option going the Fannie Mae route on my investment properties. I will definitely go Fannie once I purchase the CA property. I want to get to the 10 properties by the end of the year if not sooner.  There many hard money lenders now offering long term rental loans (30 years). I am assuming this is because the shift in investments from flips to long term hold. The long term demand was great enough for them to create a product. Only drawback is the rates. They are typically higher. By the way, great website. Really motivates me. I want to get to your level one day.

Thanks! Reach out anytime, always happy to chat. And don't shoot for my level, shoot for way higher! ;)

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