Small rural area, no comps for my duplex. How can I re finance?

5 Replies

I bought a duplex two years ago. It is owner carry. I have done extensive remodeling and upgrades and want to refinance the best egg loan I used into the original at a lower interest rate. Lenders here say we have no comps so no deal. Any suggestions?

Keep asking lenders. It is obviously worth something, even if you have to do comps on a sq ft basis with SFH nearby. They should also be able to use the income approach to come up with a value. Maybe you can do the math and present to the bank as part of your pitch. Take the hard work out of it for them.

@Brandon Crosby not ALL lenders will be able to this but you will 100% be able to find a loan for this.  Generally speaking there are 2 types of loans for us investors:  Conventional and Portfolio

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac (if you recognize those names). These loans are all 30 year fixed rate loans. They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans....but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending. Fannie/Freddie money = Fannie/Freddie rules. NOT the bank's own money.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. These loans are a lot more flexible than "conventional" loans. Bank's money = Bank's rules. If they like you, then maybe they will lend to you. But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a shorter term. The most common portfolio style loan in Texas is a 20 year adjustable rate loan. These loans are easier to get but the terms are different.

Fannie/Freddie types of loans will be available everywhere and those rules might change SLIGHTLY between lenders. Portfolio loans can run the gambit. Since each lender controls it's own money you will have to call around to ALL the banks to learn about all the programs. A mortgage broker will help with this some…but even the best mortgage brokers don't have access to ALL portfolio loans out there.

My point here is that Fannie/Freddie require a "Sales Comparison" appraisal.  They will not do a "rental income" appraisal. You will need a "portfolio" loan for that type of a loan.  It is 100% possible to find but you have to put in the time or at least know someone that ALREADY has the connection. Here's my 3 suggestions:

  1. Post in the Bigger Pockets STATE forum that you are looking in. There are usually some good, local investors that monitor those forums. Maybe they already have a suggestion or recommendation for you? Certainly try there.
  2. Visit your local REI groups. There are many groups that meet across the country. Some post here on Bigger Pockets. Many post on Networking is always a great practice and you never know who you might meet there and what good information they have to share. Would certainly recommend visiting if one is close to you.
  3. Calling - and then there's this option.  First, when calling banks target the smallest most community based banks you can first. If you have never heard of them, and they have one location - that's a good candidate. No big, national, publicly traded banks will do this loan type. Second, you want the COMMERCIAL division. That's the section of the bank we want. Now, most of these smaller banks may only have 12 employees or so. So don't get frustrated if they don't return your call or aren't in the office. Just call back and be friendly. Maybe play dumb a little "I don't know if I'm in the right place..." "I'm sorry to disturb you, you may not be the right person for this....", etc. Maybe someone can get you to the right person. Again, be prepared to call A LOT

*WHEW*  I know that was a lot but I certainly hope this helps in some way.  Good luck!