I have been wrestling with this question for a while and I'm hoping you would be able ease my anguish. My three sons, my wife and I have a partnership that owns 15 rental SFH's. The cash flow is good and we have decent equity. I want to scale our business to be able to support the entire family and trying to figure out how to fund the additional rentals. We've used fixed mortgages, private money, seller financing and portfolio loans. I prefer debt financing over equity financing. Has anyone been able to grow their business by just using loans? If so what was the source and how did you structure them?
I appreciate your feedback.
@Nuhan Demirkan Last year I refinanced part of my holdings similar sized portfolio that you have. If you have equity you can suck out some of it and potentially reduce your total debt payments. I went with a commercial loan cross collateralizing property and giving me a new infusing of cash.
Thanks Frank, did you convert fixed rate mortgages or consolidated the portfolio loans? Also, did you refi under a company name which would allow more fixed rate government secured mortgages?
I'm in a similar situation, but have SFRs in cells of a series LLC...hadn't figured out how to do a refinance.
Kerry Baird, UR Home Investments | http://www.urhomeinvestments.com
@Nuhan Demirkan this is pretty easy to do with a business banker.
As someone else mentioned you can cross-collateralize the properties to keep growing your equity and the number of properties you own.
@Nuhan Demirkan and @Kerry Baird all property with conventional financing must be in your individual name. According to one of my attorneys the property can be transferred into an LLC 60 days after closing, but consult with an attorney.
Here are a couple ideas;
If there are several family members going I to several houses....... Each family member can have up to ten conventional mortgages in their individual name. The first four mortgages in their name could be cash out refinances. If there are 5-10 mortgages.... Than you can take out private money and do a rate and term refinance afterwards..... A little more work, twice actually, but it gets the money out of the property.
I am always glad to answer financing questions. I hope this helps you both.
Debt financing is the bets choice for small bushiness who feel shy to just borrow money. In this you can borrow money and repay the same in some year with an additional interest amount. Whereas in equity financing, small business raise the capital by selling shares of a business to investors. The capital raised through this isn’t paid back in monthly payments but investor become partial owner of the business and share the profit over time. The choice between the two depends upon the nature of the business you owned. If you want to learn about this in detail visit: http://bit.ly/1uwCZ7b
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!