Is refinancing rentals with LendingOne my best strategy?
Investor · Cleveland, OH · Member since 2011 · 603 posts · 130 votes
I am a BRRRR guy- I have 27 rentals and counting. About 20 of them are financed through local commercial banks. Several years ago I called 30+ banks in Ohio to find 3 lenders who did my first 20 deals on a commercial loans. Since then my buying has been too fast for them to continue lending. These commercial lenders wanted to see my recent purchases season to see how they perform but the problem is I always have new properties coming in so the portfolio is never stable enough for them to feel comfortable enough to keep refinancing new properties.
My alternatives have been the national lenders - limaone/LendingOne/ect... I checked all of them out and settled on LendingOne who seemed to have the best rates/fees though they are still terrible and expensive compared to the banks that I miss so much.
Recent deal was 8/1 Arm at 6.75 over 30 years. $2700 closing costs on a 90K refinance - :(
Is this really that bad? Its nice to know I can continue to grow my business even if the lending side has become more expensive for me.
How are you refinancing rentals after you surpass the 10 conventional?
I am a BRRRR guy- I have 27 rentals and counting. About 20 of them are financed through local commercial banks. Several years ago I called 30+ banks in Ohio to find 3 lenders who did my first 20 deals on a commercial loans. Since then my buying has been too fast for them to continue lending. These commercial lenders wanted to see my recent purchases season to see how they perform but the problem is I always have new properties coming in so the portfolio is never stable enough for them to feel comfortable enough to keep refinancing new properties.
My alternatives have been the national lenders - limaone/LendingOne/ect... I checked all of them out and settled on LendingOne who seemed to have the best rates/fees though they are still terrible and expensive compared to the banks that I miss so much.
Recent deal was 8/1 Arm at 6.75 over 30 years. $2700 closing costs on a 90K refinance - :(
Is this really that bad? Its nice to know I can continue to grow my business even if the lending side has become more expensive for me.
How are you refinancing rentals after you surpass the 10 conventional?
This is going to fly in the face of biggerpockets.com culture, and it's outright heresy for a lender to say it, but have you considered slowing down and consolidating? Buying additional real estate is one way to increase cashflow, another way is to simply pay off mortgages. With that much rapid growth, I can't imagine there isn't also some other optimizing that could be done - renovating kitchens between tenants to maximize rent, that sort of thing.
Try Conventus and compare their rates
Definitely a question for those in the mortgage field, i.e. @Andrew Postell or @Chris Mason .
However, here are a few options, if I think out loud:
Anyways, good luck with everything. Definitely a good problem to have.
Overall, just create at least the impression of cash flow and excess cash to look more stable on paper. Just let the accounts swell and become cash rich in the short term to prove that you have the foundation to pay off debts if a few go vacant at the same time.
Sincerely,
Scott
I am a BRRRR guy- I have 27 rentals and counting. About 20 of them are financed through local commercial banks. Several years ago I called 30+ banks in Ohio to find 3 lenders who did my first 20 deals on a commercial loans. Since then my buying has been too fast for them to continue lending. These commercial lenders wanted to see my recent purchases season to see how they perform but the problem is I always have new properties coming in so the portfolio is never stable enough for them to feel comfortable enough to keep refinancing new properties.
My alternatives have been the national lenders - limaone/LendingOne/ect... I checked all of them out and settled on LendingOne who seemed to have the best rates/fees though they are still terrible and expensive compared to the banks that I miss so much.
Recent deal was 8/1 Arm at 6.75 over 30 years. $2700 closing costs on a 90K refinance - :(
Is this really that bad? Its nice to know I can continue to grow my business even if the lending side has become more expensive for me.
How are you refinancing rentals after you surpass the 10 conventional?
This is going to fly in the face of biggerpockets.com culture, and it's outright heresy for a lender to say it, but have you considered slowing down and consolidating? Buying additional real estate is one way to increase cashflow, another way is to simply pay off mortgages. With that much rapid growth, I can't imagine there isn't also some other optimizing that could be done - renovating kitchens between tenants to maximize rent, that sort of thing.
Try Conventus and compare their rates
Just called them - they dont do anything long term. I am getting mine amortized over 20 and 30 years he was closer to 7
I am a BRRRR guy- I have 27 rentals and counting. About 20 of them are financed through local commercial banks. Several years ago I called 30+ banks in Ohio to find 3 lenders who did my first 20 deals on a commercial loans. Since then my buying has been too fast for them to continue lending. These commercial lenders wanted to see my recent purchases season to see how they perform but the problem is I always have new properties coming in so the portfolio is never stable enough for them to feel comfortable enough to keep refinancing new properties.
My alternatives have been the national lenders - limaone/LendingOne/ect... I checked all of them out and settled on LendingOne who seemed to have the best rates/fees though they are still terrible and expensive compared to the banks that I miss so much.
Recent deal was 8/1 Arm at 6.75 over 30 years. $2700 closing costs on a 90K refinance - :(
Is this really that bad? Its nice to know I can continue to grow my business even if the lending side has become more expensive for me.
How are you refinancing rentals after you surpass the 10 conventional?
This is going to fly in the face of biggerpockets.com culture, and it's outright heresy for a lender to say it, but have you considered slowing down and consolidating? Buying additional real estate is one way to increase cashflow, another way is to simply pay off mortgages. With that much rapid growth, I can't imagine there isn't also some other optimizing that could be done - renovating kitchens between tenants to maximize rent, that sort of thing.
I am fairly young - 31 years old and time is on my side so I am all about leveraging, thats partly why I got into real estate. To me the idea of paying off one of my properties is like speaking another language. I am not trying to go all out and leverage to the max but if I had more then 50% loan to equity in any of my houses I would sell or refinance and reinvest that cash to earn more then what I was borrowing it at.
Also - since I use the BRRRR strategy, nearly all of my properties are remodeled. So 80% of them are at premium rents already.
If the closing costs includes appraisal, inspection, doc fees, origination points etc..; then 3% is not that bad; for property under $100,000
I am a BRRRR guy- I have 27 rentals and counting. About 20 of them are financed through local commercial banks. Several years ago I called 30+ banks in Ohio to find 3 lenders who did my first 20 deals on a commercial loans. Since then my buying has been too fast for them to continue lending. These commercial lenders wanted to see my recent purchases season to see how they perform but the problem is I always have new properties coming in so the portfolio is never stable enough for them to feel comfortable enough to keep refinancing new properties.
My alternatives have been the national lenders - limaone/LendingOne/ect... I checked all of them out and settled on LendingOne who seemed to have the best rates/fees though they are still terrible and expensive compared to the banks that I miss so much.
Recent deal was 8/1 Arm at 6.75 over 30 years. $2700 closing costs on a 90K refinance - :(
Is this really that bad? Its nice to know I can continue to grow my business even if the lending side has become more expensive for me.
How are you refinancing rentals after you surpass the 10 conventional?
That's not really bad although there are 30 year rates out there that are similar for close to the same cost. Congratulations on your success.
Stephanie
Seeing that you're in the mid-west and own 20+ houses I am going to guess most of these are very inexpensive and small SFH (purchase price under 100k). I agree with @Chris Mason - sell a handful and roll it into a larger property. Do a 1031. You'll see it's much easier on the management side of things. Quality over quantity my man. I own a fraction of what you own but I would guess the cash flow is the same or larger and I don't have 30 roofs to worry about.
Seeing that you're in the mid-west and own 20+ houses I am going to guess most of these are very inexpensive and small SFH (purchase price under 100k). I agree with @Chris Mason - sell a handful and roll it into a larger property. Do a 1031. You'll see it's much easier on the management side of things. Quality over quantity my man. I own a fraction of what you own but I would guess the cash flow is the same or larger and I don't have 30 roofs to worry about.
I invest in B class neighborhoods some of them might be considered c+ but your right. An example deal for me would be purchase price 50K rehab 50k . Arv 150k
I totally get economies of scale which is why my short-term plan is going to be getting into apartment buildings. I am actually looking at 8 unit right now but eventually large units is where I want to go
I am a BRRRR guy- I have 27 rentals and counting. About 20 of them are financed through local commercial banks. Several years ago I called 30+ banks in Ohio to find 3 lenders who did my first 20 deals on a commercial loans. Since then my buying has been too fast for them to continue lending. These commercial lenders wanted to see my recent purchases season to see how they perform but the problem is I always have new properties coming in so the portfolio is never stable enough for them to feel comfortable enough to keep refinancing new properties.
My alternatives have been the national lenders - limaone/LendingOne/ect... I checked all of them out and settled on LendingOne who seemed to have the best rates/fees though they are still terrible and expensive compared to the banks that I miss so much.
Recent deal was 8/1 Arm at 6.75 over 30 years. $2700 closing costs on a 90K refinance - :(
Is this really that bad? Its nice to know I can continue to grow my business even if the lending side has become more expensive for me.
How are you refinancing rentals after you surpass the 10 conventional?
This is going to fly in the face of biggerpockets.com culture, and it's outright heresy for a lender to say it, but have you considered slowing down and consolidating? Buying additional real estate is one way to increase cashflow, another way is to simply pay off mortgages. With that much rapid growth, I can't imagine there isn't also some other optimizing that could be done - renovating kitchens between tenants to maximize rent, that sort of thing.
I am fairly young - 31 years old and time is on my side so I am all about leveraging, thats partly why I got into real estate. To me the idea of paying off one of my properties is like speaking another language. I am not trying to go all out and leverage to the max but if I had more then 50% loan to equity in any of my houses I would sell or refinance and reinvest that cash to earn more then what I was borrowing it at.
Also - since I use the BRRRR strategy, nearly all of my properties are remodeled. So 80% of them are at premium rents already.
You grew fast enough upfront that I suspect a possible retirement is closer than you think, if you were to start the consolidation phase now. Up to you. Good luck. :)
@Adam Craig. Hope the party doesn’t end during the next recession with all that debt and likely balloon payments you’ll have over time.
You can’t always refinance. If you’re 31 you probably have done all of this post last recession. Which is great since that was a great buying time period.
I’m with Chris, just pay some off or slow down for 6 months. It won’t be the end of the world. Growth for the sake of growth isn’t always a good thing.
@Adam Craig. Hope the party doesn’t end during the next recession with all that debt and likely balloon payments you’ll have over time.
You can’t always refinance. If you’re 31 you probably have done all of this post last recession. Which is great since that was a great buying time period.
I’m with Chris, just pay some off or slow down for 6 months. It won’t be the end of the world. Growth for the sake of growth isn’t always a good thing.
I was not investing during that period - thank god. But that was potentially one of the worst recessions we will see for some time and the housing market can decline, but unlikely it will be as bad as 2006 - so many different rules in place to ensure better mortgages.
With that said I understand the unlikely can happen - but I am not refinancing my BRRRR properties to pull cash out- I am just rate term refi - so I am at 65% ish LTV or less on most of my loans.
You really think having a house paid off is a good move? I can see slowing down to let things catch up but I cannot see how having 150K sitting in a house doing nothing for you when it can be put into stocks/real estate/retirement - anything but sit there.
@Adam Craig. Hope the party doesn’t end during the next recession with all that debt and likely balloon payments you’ll have over time.
You can’t always refinance. If you’re 31 you probably have done all of this post last recession. Which is great since that was a great buying time period.
I’m with Chris, just pay some off or slow down for 6 months. It won’t be the end of the world. Growth for the sake of growth isn’t always a good thing.
I was not investing during that period - thank god. But that was potentially one of the worst recessions we will see for some time and the housing market can decline, but unlikely it will be as bad as 2006 - so many different rules in place to ensure better mortgages.
With that said I understand the unlikely can happen - but I am not refinancing my BRRRR properties to pull cash out- I am just rate term refi - so I am at 65% ish LTV or less on most of my loans.
You really think having a house paid off is a good move? I can see slowing down to let things catch up but I cannot see how having 150K sitting in a house doing nothing for you when it can be put into stocks/real estate/retirement - anything but sit there.
There are two ways to view the leverage argument. I’m not saying it’s bad, I’m also saying debt on everything likely isn’t good either. You can do it whatever way you want, but if your bank is just wanting you to slow down for a few months, I personally think that’s the best option, then just keep using that bank.
@Adam Craig. Hope the party doesn’t end during the next recession with all that debt and likely balloon payments you’ll have over time.
You can’t always refinance. If you’re 31 you probably have done all of this post last recession. Which is great since that was a great buying time period.
I’m with Chris, just pay some off or slow down for 6 months. It won’t be the end of the world. Growth for the sake of growth isn’t always a good thing.
I was not investing during that period - thank god. But that was potentially one of the worst recessions we will see for some time and the housing market can decline, but unlikely it will be as bad as 2006 - so many different rules in place to ensure better mortgages.
With that said I understand the unlikely can happen - but I am not refinancing my BRRRR properties to pull cash out- I am just rate term refi - so I am at 65% ish LTV or less on most of my loans.
You really think having a house paid off is a good move? I can see slowing down to let things catch up but I cannot see how having 150K sitting in a house doing nothing for you when it can be put into stocks/real estate/retirement - anything but sit there.
There are two ways to view the leverage argument. I’m not saying it’s bad, I’m also saying debt on everything likely isn’t good either. You can do it whatever way you want, but if your bank is just wanting you to slow down for a few months, I personally think that’s the best option, then just keep using that bank.
If its a few months or even 6 I can do that. I just assumed it would be a year to get tax records to catch up. But you have at least convinced me to reach out to them for some clarification.
I work with investors that are in your same situation. Carrington mortgage has a product called the Investor Advantage Plus that are loans based just on the cash flow of the property and they will lend up to 100% PITI, rates starting at 5.75% if you're over 680 up to 85% LTV cash out. The unit can be kept in the LLC and there is no debt to income calculated and none of your other properties come into play. Send me a message if you want me to refer you to someone, I'm only licensed in Arizona and California.
Hi @Adam Craig Not sure what your credit score is but I've found LendingOne to have high rates. Those closing costs are good though. I've worked with others out there with better rates. It is funny how banks treat you when your portfolio grows. I never would've guessed it when I first started out. Good problem to have.... but still a problem :)
Once I started working with lenders that loaned on the property and not my personal finances things really took off. So while the money is a bit more expensive, if it allows you to grow and keep increasing your monthly cashflow, that's a good thing.
I just want to lay out the framework of options and typically which is cheapest and the best options for an investor by number of Properties Owned:
1-5: Conventential loan through a traditional mortgage company or bank (Caveat: if you are self employed this can get challenging. You most likely will need a DSCR driven program)
5-10: Conventential loan through a traditional mortgage company or bank. This starts getting very tough to get approved unless you have a lot of W2 income and excess liquidity
>10: A Conventential loan is no longer an option. You must go to a regional bank in their C&I lending group or a national private lender. A regional/local bank typically caps a borrower's exposure between $2-3M per borrower so you need to work with multiple banks once you reach that limit. Rates are cheapest with a bank, but they will be a 5/7/10 term based on a 20 or 25-year amortization. This impacts the cash flow of the property and you are subject to interest rate risk at the rate reset period. If you are holding short-term and you have a good bank then this is a good option.
Most national lender's rates are driven by credit score, ltv, and experience. FYI: For a non-bank national lender, we have some of the lowest rates in the industry. If you are comparing non-bank lenders to a bank, then all the private lenders will be more expensive.
You know when you get small loan is hard with local bank . And many mortgage lender charge higher fee . Why not just combine all sell it and down payment for big apartment. Bank won’t look at your financial anymore they focus on that apartment can generate income or not . When small loan hard to get is the time to get bigger loan . But still be careful with new strategies. Bigger make you richer quicker but still can turn you down . Good luck
Need a good private option. Those are big shops that don't know how to close a constructive DSCR file quickly. The prime rate is 7.5%. The floor for 30 year fixed (5/1 ARM included) is about 7.25%. Would love to talk about what you're working on.. Not worried about DTI or income.