Portfolio Loan Experience

5 Replies | Portland, Oregon

Hi all,

My business partner and I have exhausted our Freddie/Fannie loan capabilities.  We both have 10 mortgages in our name.  Mainly our portfolio consists of small multifamily properties and we have 30y fixed financing on all of them.

The portfolio is at about 65% LTV currently. And out of the 20 properties we've got about 8 that are between 40 to 50% LTV around 5% or 6% interest rates with plenty of cash flow to support a 75% LTV 30y Loan. I am interested in packaging them together in a portfolio loan.

Does anyone have experience with Portfolio loans? What kind of rates and LTV's are available out there? Is there a lender that specializes in these loan that you know of?

Is there something else I should be considering that I’m not thinking of?

Thank you!

@Chris Shepard

Are you looking to cash out on them? You can still cash out refinance them with an LTV of 75% on SFR and 70% on MFR. As long as the 10 are in your individual names, you can still refinance or cash out refinance them.

The main thing that stalls out some of these portfolio loan deals are the Values of the properties individually. 

Most lenders like to see at least a 75k min property value some go has high as 100k min. 

You can get a portfolio loan for properties below those values however the pool of lenders thin out and local credit unions tend to be the safe bet on those type of loans 

@Jerry Padilla Yes we are looking for cash out and to reduce our interest rate.  I know we can refinance them individually, it’s just a time consuming process to get the best rates.  What we’ve been doing in the past is having our Dad pay them off and put on a trust deed and then writing up a promissory note and then refinancing that so that we are doing a rate and term Refi and not cash out.  It just takes a lot of time. 

@Tarik Turner fortunately our properties are over the 100k mark and the loan would be over 1m so we check the boxes there.

Has anyone done a portfolio loan out there?


@Chris Shepard

I know this doesn't answer your question specifically but once you go with a "blanket loan" you start running into additional restrictions. Most are 10-15 year terms which can kill cash flow if not amort over 30 years, although this might not be a concern for you.

Doing a portfolio blanket loan would take no less time than just doing an individual loan in all that closes together. They are all underwritten separately and appraisals are normally still done on each one. Then you run into trouble should you want to separate them or sell some of them later down the road, if you plan to keep these for 10+ years then it doesn't matter as much.

You will also still be capped on your fannie/freddie regardless of if you move them to a blanket loan, so keep that in mind as well.

@Nicholas Covington

Hey Nick, 

Thanks for the response. It's difficult to decide how exactly to move forward with this... we could refinance them each individually using traditional SFR lenders and that would provide the most cash out, decent rates, and the most flexibility.

Let me explain our situation a little bit.  We own and operate a property management company and this is our buy and hold portfolio which we don’t plan on selling...ever.    

The goal this quarter is to generate passive income / cash flow from our Portfolio.  Currently it is a cash eating monster as we have quite a few older units that require rehab.  We’ve also done the work on a decent amount of them, but haven’t refied then yet, or we refied 5 or so years ago and values have almost doubled since then.  

Our LTV on the portfolio is 61% and our weighted average interest rate is 5.1% with 28 units valued at about 6m.

I’m just struggling with the pros and cons of a portfolio refinance vs doing traditional Refis.  

The portfolio refinance helps our cash flow significant as they have a lower interest rate immediately and will do an interest only option with no impounds.  It’s $140,000 less per year (but $80.000 is taxes and insurance, which we’d still have to pay and $50,000 it is principal which we get the benefit of down the line) in total payments.  

The cons are that its only a 7 or 10 year loan that has to be refinanced at some point in the future.  As well with the 30 amortized loans, we actually pay less interest every year and more principal, so we get the benefit even more the longer we keep the loan.  As well with the portfolio loan there are prepayment penalties if you want a competitive rate, so if we had to invest a lot of capital into a property there’s no way to get it back out by refinancing for 7 or 10 years. 

The problem with traditional refinances is that it just doesn’t help us with our goal of generating cash flow.  It helps us generate capital which is great, but does not help with the passive income goal.

I am a little disappointed because I was thinking that the portfolio refinance was going to be a great option for us, but now I’m not so sure.  I’m still wondering if there’s anyone out there who has done a portfolio loan and has experience to share.