How you have your properties financed?

Question

I interested if any investors are willing to share, approx. percentages of how they have their properties financed?

I would like to know what different types of financing you are using.

Which ones are your favorite?

What you would recommend to a new investor?

I know this could go a thousand different ways but anything you are willing to share would be of great interest to me and I'm sure other investors.

George P. · Answer

i just locked in a 30 yr at 3.625% with flagstar. paid around $300 to get it down from 3.99%. would not consider anything but 30 yr fixed.

money is dirt cheap these days if you ask me..

George P. · Answer

My mortgage  broker got me a loan with Provident which are in Santa Rosa, Ca.when I called them directly for my second, they said "oh, we don't offer mortgages in Michigan "...huh?

Jon Holdman · Answer

The cheapest option is conventional, 30 year fixed.  Figure half to a full point higher interest than you see advertised and 20% down on investment properties.

Portfolio lenders can get you past the 10 property limit.  You're looking at 15 year loans there, at a slightly lower rate than for 30 year fixed conventional.  20% down for these, also.

For long term holds, those are your best options.  Private money, meaning someone you personally know, is probably going to be high single digits.  Hard money (even those that call themselves private money lenders) are more like low to mid double digits.

Account Closed · Answer

10 year fixed conventional on SFRs. 20-25% down.  The cash flow is comfortably paying the loan after expenses with some small residual. My objective is fully paid off properties in less than 10 years.

Account Closed · Answer

@George P. yes, the loan is in the LLC. It is small local bank.

Account Closed · Answer

Our properties are buy and hold. We have one duplex, 3 mobiles and 5 sfh. We purchased our first three properties with the home equity. The LLC purchased the remaining. The original three properties are also now in the LLC's name.

Account Closed · Answer

We got started using a home equity loan to buy our first three properties. The interest rate 3.125%. For other properties, we have a commercial loan at 5.25%

My favorite is the home equity because that was what got us started!

Mark Ferguson · Answer

I have a great portfolio lender.  I am doing 20% down, 5/30 ARMs at about 3.62%.  I can do that up to 10 and then the rate jumps half a percent.  
I put all cash flow into paying off loans one at a time and the mortgages will be paid off before the ARMs start adjusting. 
I can also cash out refi with them at 75% loan to value based off appraisal.

Mike H. · Answer

The best type of financing is conventional - 30 yr fixed. I'm a little surprised that Aaron A has been using commercial loans. From the looks of it, they would technically not have any rental properties counting against their limit (fannie has 10 mortgage limit and freddie 4).

The equity line of credit would not show up against their limit. It would show up against their primary and count as one.

But the reason I say I'm surprised is that I was wondering why you would not want to lock in today's rate for 30 years. Thats a huge bump in cash flow and some security in case the rates change in 5 years - which is what I'm assuming your commercial loans balloon at.

As for me, I currently have 7 properties with conventional financing. I had 8 but just convinced one of the local banks thats servicing the loan to bring in house for me. And I have another 12 properties under commercial loans.

I have actually been trying extremely hard to get the 6 rental properties I currently have in my name into a blanket loan. Was very close two separate times. But just found out last week that the bank said no.

If I had been able to do that, it would have freed me up to add at least another 9 properties.

Whats tough about commercial loans is that local banks are extremely iffy on whether they're going to do a deal or not in the future. They may be lending on SFH investment properties in their commercial dept and may literally shut that down tomorrow.  There's no guarantee.

I have 7 local banks that have done commercial loans with me. And most of them have stopped doing them completely. The rest are extremely hesitant.   I try to spread them out so they don't feel like they are doing too many with me.

Just when I think I have my next one lined up because the bank had told me 6 months ago that they were looking for loans, the situation has changed and they are no longer available.

Thats why I'm holding those 3 conventional spots open. Just in case, they all say they're done and I need to find someone doing the fannie mae 5-10 loans.

There's a new lender thats doing some creative things (new penn financial or something like that) and they will allow up to 20 mortgages. But I think they will only do 4 with any one investor. The catch there for me is their minimum loan amount - 100k. I don't have anything I buy in that price range. My sweet spot tends to be 75k to 90k. Any more than that and the payments and taxes don't work out to enough profit in the rent range.  Or else the rent range is too high for what I like (I don't like houses that rent for over 1,400 - I think that limits the renter pool too much).

Will Barnard · Answer

An example of a recent deal: $415k purchase with $50k rehab. Private investor loaned $400k @ 12% interest for 6 months balloon payment(I also got $10k+ back from agent fee so actual purchase price would be $405k).
I just sold the house a few weeks ago, total time of hold was only 105 days, sold for $555k, lender was paid back from escrow proceeds (approx. $413,808 principle and interest)

I have a large project that I originally borrowed $1M at 12% with monthly payments back on July 27, 2012. I am placing $600k into the rehab and the exit value at that time was $2.5M. So the loan to value was very small (40% based on ARV) I have since purchased the lots surrounding this property and have taken on an additional $550k of debt at same terms and rate. New exit value is $3.5M+ so LTV remains very low at 44%.

Another deal I did last year where I made a purchase at $205k, placed $60k into rehab, and sold for $360k with a private money loan at $200k for 12%, principle and interest due at balloon date or sold date.

How you have your properties financed?

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