Commercial Loan Refinance Help

6 Replies

All,

  I have 7 townhouses all on commercial loans.  4 are on one loan and I have been paying this for 3 years.  It is fixed for 5 at 5% years amortized for 20, and then can be variable.  My loan officer said we can just write up the loan at the new rate after 5 years.  Not sure if this means he will lock it at new rate for 5 more years or what.  I have a prepayment penalty if I refinance with some other bank also it decreases one percent per year so now is 2 percent.

I bought these 4 for 250K (62500 each) and when I bought them in 2015 they appraised for 292K (73000 each).  I put 20% down on these.  I currently owe 180K so I have some equity.  I believe these are worth 80K each or more now.  Zillow and redfin have them quite a bit higher but i don't believe it.  The rents have always doubled the mortgage and I have no trouble renting them.  They are 2 bedroom 1200 Sq feet in good location near Knoxville.

I would like to keep growing and get more properties but don't have the funds for down payment.  I am a little nervous about the variable rates rising also.

I have great credit and a good stable day job.

Some questions I have.

1. Should I try to refi now and cash out equity to do another deal?

2. Should I try to get a fixed or non commercial loan?

3. Any advice as what my strategy should be moving forward?

Mike

@Mike Cox Whether or not you take out cash to do other deals is up to you, your risk tolerance and opportunities to invest the funds. 

Specific to the loan - I think you are best to lock in fixed rate notes, minimum term of 15 years.

Your strategy going forward - has everything to do with what you hope to accomplish!

Good luck! 

Travis,

Good points.  Any tips on getting fixed loans for these?  

What kind of rate should I expect?

@Mike Cox - You could refi them all under one blanket loan if you want.  As Travis indicated, you need to decide for yourself what you want to do.  

PM me if you need assistance.

@Mike Cox - best way to find a fixed rate loan is to shop around - contact local banks or a fannie direct mortgage lender. Assuming you are bankable rates right now should be around 5%.

If possible, I wouldn't put all the properties into a blanket loan unless there is a 150% chance you will never sell them. There are too many negatives vs positives in encumbering all of the properties if you ever need to liquidate one property.

My goal is to buy 20 cash flowing rentals in decent neighborhoods.  By 2022 and then disappear for a while on my boat.  8 down 12 to go.

The first were easy to get i made some money on a modest lake I home I built and did a refi. Bought 4. Then from same seller a year later I bought 3 more with a loan from Solo 401K i set up. I also have a condo lived in after I sold the lake house. I rented the condo and bought my personal residence with nothing down VA loan. It has appreciated nicely on paper since 2015.

I am kind of tapped out for money for down payments now so this is why I want to refinance, not to mention the rates are going up and I have commercial loans.

Comments and advice appreciated.

Mike

You can always tap that equity with a HELOC for access to cash for down payments to help you scale as well.

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