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Updated over 3 years ago on . Most recent reply

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Vince Liu
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How to find a good portfolio lender?

Vince Liu
Posted

Hello BP - I've been trying to find a good portfolio lender for rental property acquisitions. I've talked to many national portfolio lenders (included the recommended vendors on BP), they either have super high interest rate or crazy fees. Not trying to ask for recommendations of lenders, but merely...what is the way to go to find a good portfolio lender?

Thank you!

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Chris Mason
  • Lender
  • California
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9,935
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Chris Mason
  • Lender
  • California
ModeratorReplied
Originally posted by @Vince Liu:

Hello BP - I've been trying to find a good portfolio lender for rental property acquisitions. I've talked to many national portfolio lenders (included the recommended vendors on BP), they either have super high interest rate or crazy fees. Not trying to ask for recommendations of lenders, but merely...what is the way to go to find a good portfolio lender?

Thank you!

 I think your expectations are out of alignment. 

Agency loans (non-portfolio) are characterized by back end profits from Fannie/Freddie, which (being that they are now gov't run) amounts to a big fat subsidy from the taxpayer. In COVID world, where both the Fed and Treasury are trying to pump up real estate with printed money (or, think of M1 Garand rifles in 1942, gov't is paying 20% over the normal rifle profit margin), those back-end profits are usually something like 5x to 10x the borrower paid fees on an Agency loan, meaning that if you pay $1500 in lender fees for a $500k loan at whatever rate, I'd expect the bank's back end net profit to be in the $10k to $15k range.

Portfolio loans have no back end profit or subsidy. So for it to make sense to lend you any money, at all, rather than lending it to someone seeking an Agency loan, that lost profit needs to come from you, some way or another. You are starting off with a $10k to $15k deficit by not checking the Agency boxes, that deficit needs to be zeroed out one way or another (fees, rate, terms, etc) before the portfolio lender can even consider making an actual profit (relative to the other opportunity, lending that $500k to a vanilla ho-hum W2 couple buying a primary residence, etc, where there's an automatic guaranteed freshly minted $10,000 bill [it's a two-party bill, btw,  Trump and Biden's faces both appear on this $10,000 bill together] guaranteed to come their way).

The sticker shock is sufficient that I try to avoid quoting non-Agency portfolio rates/fees/etc entirely, unless someone specifically requests it. 

  • Chris Mason
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