Refi Loan advice needed - due to reset and unsure what to do

3 Replies

Hello BP

Seeking advice on what to do with my LLC rental property loans, which are due to reset in the next few years.

Currently all are 5 year ARM no balloon and 30 year amortization. The reset rate for next 5 year term is 5-yr Treasury + 3% with ceiling of 8-9% (depending on loan). Each property cash flows positive $800-1200 per month, and they will payoff at current rate in 10-13 years applying all profit to loan principal.

Here is the roster:

$400k VALUE $270k loan @ 4.7 until 9/19

$360k VALUE $250k loan @ 3.8 until 5/21

$400k VALUE $275k loan @ 4.17 until 1/1/21

$360k VALUE $175k loan @ 4.56 until 2/1/20

These are investment properties and goal is to take cashflow in 10-12 years/also buying more each year.

My experience thusfar:

Big banks can't do anything with small commercial loans. One would wrap into a 7 yr arm @5.5% to start, IF I transferred over what assets I could for 1% AUM fee - no thanks.

Small local banks have been most flexible, but 3 mostly advise just letting the rates reset as they come up, as the current rates are pretty good - assuming 0.25% rate bumps I guess I'm looking at 5-6% loan rates for the next 5 year term. 

At this point, we are inclined to just let them ride and reset for the next 5-year term.

WWYD/Thanks in advance for any advice!

@Warren E.   Those are all pretty good rates now, and if you mean they will reset starting in a "few" years (meaning in 3 years), I would let them ride as is for now.  Maybe re-assess in 2 years from now and see where interest rates are, and that would still give you one year to act.  

Welcome to BP!

- Tom

Originally posted by @Warren E. :

Hello BP

Seeking advice on what to do with my LLC rental property loans, which are due to reset in the next few years.

Currently all are 5 year ARM no balloon and 30 year amortization. The reset rate for next 5 year term is 5-yr Treasury + 3% with ceiling of 8-9% (depending on loan). Each property cash flows positive $800-1200 per month, and they will payoff at current rate in 10-13 years applying all profit to loan principal.

Here is the roster:

$400k VALUE $270k loan @ 4.7 until 9/19

$360k VALUE $250k loan @ 3.8 until 5/21

$400k VALUE $275k loan @ 4.17 until 1/1/21

$360k VALUE $175k loan @ 4.56 until 2/1/20

These are investment properties and goal is to take cashflow in 10-12 years/also buying more each year.

My experience thusfar:

Big banks can't do anything with small commercial loans. One would wrap into a 7 yr arm @5.5% to start, IF I transferred over what assets I could for 1% AUM fee - no thanks.

Small local banks have been most flexible, but 3 mostly advise just letting the rates reset as they come up, as the current rates are pretty good - assuming 0.25% rate bumps I guess I'm looking at 5-6% loan rates for the next 5 year term. 

At this point, we are inclined to just let them ride and reset for the next 5-year term.

WWYD/Thanks in advance for any advice!

 While I'd love to help you, I think you should stick with what you have.  Your rates are too good, your loan to value is too tight and you still have plenty of time on the loans.  

Congratulations

Sounding a little more conservative, I would take all the cash flow, add in about $1000 to $2000 (or whatever you can) and pay 1 of the mortgages off within 3 years. If you dont need the money to live, why not pay the mortgage down even faster??

If you can get another one or two in the mix, you will be able to pay off 1 house within 2 years and the cash flow only increases.This would help to pay more properties off quicker. With 4 paid off properties you can retire from having to work for someone else.