RENTAL HOME FINANCING (by NC INVESTOR [C]) Sep 19, 2017 4:19 AM
RENTAL HOME FINANCING (by David [MI]) Sep 19, 2017 5:14 AM
RENTAL HOME FINANCING (by Deanna [TX]) Sep 19, 2017 5:44 AM
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Sep 19, 2017 5:46 AM
RENTAL HOME FINANCING (by S i d [MO]) Sep 19, 2017 6:58 AM
RENTAL HOME FINANCING (by S i d [MO]) Sep 19, 2017 7:07 AM
RENTAL HOME FINANCING (by Chris [CT]) Sep 19, 2017 1:09 PM
RENTAL HOME FINANCING (by Pmh [TX]) Sep 19, 2017 1:49 PM
RENTAL HOME FINANCING (by David [MI]) Sep 19, 2017 5:25 PM
RENTAL HOME FINANCING (by #22 [MO]) Sep 20, 2017 4:56 AM
RENTAL HOME FINANCING (by razorback_tim [AR]) Sep 20, 2017 5:08 AM
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Sep 20, 2017 3:09 PM
RENTAL HOME FINANCING (by Jeffrey [VA]) Sep 21, 2017 4:03 AM
RENTAL HOME FINANCING (by Pmh [TX]) Sep 21, 2017 6:57 AM
RENTAL HOME FINANCING (by JR [ME]) Sep 21, 2017 7:11 AM
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Sep 21, 2017 9:13 AM
RENTAL HOME FINANCING (by David [MI]) Sep 21, 2017 9:17 AM
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Sep 21, 2017 5:28 PM
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Sep 21, 2017 5:28 PM
RENTAL HOME FINANCING (by razorback_tim [AR]) Sep 21, 2017 6:03 PM
RENTAL HOME FINANCING (by GKARL [PA]) Sep 22, 2017 4:46 AM
RENTAL HOME FINANCING (by NC INVESTOR [C]) Posted on: Sep 19, 2017 4:19 AM Message:
How many of you have your properties financed with traditional banks / S&L's vs. commercial lenders?
When we started this business our LLC was new so the banks wouldn't do commercial loans so they all went into our personal names. By the time we wanted to switch over the housing crash was there were no real options other than hard money which was prohibitive.
We are in the process of trying this again since there seem to be a number of options available. My concern is they all want us to do blanket loans which on the surface makes the most sense unless / until we want to pull a property out. The prepayment can be costly. Our acct. and tax atty. are split on the pros and cons of doing this.
What is your experience?
--75.181.xxx.xx |
RENTAL HOME FINANCING (by David [MI]) Posted on: Sep 19, 2017 5:14 AM Message:
I have maxed out the 20 conventional mortgages between my wife and me. I have a few under an LLC with a portfolio lender, not bank,at 30 years fixed. The prices have shot up this summer so haven't bought any more. --166.137.xx.xx |
RENTAL HOME FINANCING (by Deanna [TX]) Posted on: Sep 19, 2017 5:44 AM Message:
I tried getting a loan against a paid-off house, owned by my single-member LLC. I had three or four houses coming onto the market, and I could afford to buy them--- but not renovate them, so I thought getting a loan would speed things up.
But even though the loan was secured by the house, I had to personally guarantee it, since it was my LLC. And since I didn't have a W2 job at the time, my husband had to personally guarantee me, even though he wasn't part of the LLC. And that was the whole purpose of trying to get a loan-- was to keep him out of things, and to let the LLC stand on its own feet as its own entity.
There were other annoyances as well-- what kind of insurance, who it had to be with, how much it had to be for. Annual reporting on rental and personal assets. Other stuff. The loan was only available for 5 years, and the rate on the papers weren't the same rate the bank guy had verbally advertised, and when we tried getting it turned into a 30-year loan around year 3, that wasn't an option, either.
We paid it off as fast as we could, and have just limited ourselves to cash purchases since then. --96.46.xxx.xx |
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Posted on: Sep 19, 2017 5:46 AM Message:
We are in the same spot. Maxed out at 20 with the banks in the first year we started the business. The other 10 we bought with our 401K's as an alt investment product which was one of the smarter decision.
The plan is not to touch the 10 since we are getting almost 16% return on those. --75.181.xxx.xx |
RENTAL HOME FINANCING (by S i d [MO]) Posted on: Sep 19, 2017 6:58 AM Message:
Banks will not lend to LLCs or "businesses" until you are making a ton of money and have been around a long time. They will let you title the properties in your LLC's name, and they will let you get more loans, but you will be signing papers personally guaranteeing the loans.
"Business loans" only belong to the business in the investor's mind. In reality, the bank has you personally guarantee the loans, regardless, just like any other personal loan.
Fail to pay and they will come after you, personally. Your house, your bank account, whatever assets you own that they need to satisfy the judgment if there is a deficiency. Your credit will be trashed.
I'm not a fan of borrowing money for reasons I will not go into at this time, but since so many here do it that way I try to suggest the least bad way to do it.
1) Get the longest fixed rate term you can get. Rates are holding steady or going up, so there's no reason to get a short fix and expect them to go down. 5-7 years is the max most banks will fix. Pay the slightly higher rate if you can get a 7 year. Mitigate risk.
2) No balloon payments.
Balloons and adjustable rates are two of the primary causes of the subprime meltdown. Don't repeat the foolish mistakes we learned a decade ago. --173.19.xx.xxx |
RENTAL HOME FINANCING (by S i d [MO]) Posted on: Sep 19, 2017 7:07 AM Message:
Btw, I think that blanket loans probably have more Cons than Pros. If your intention is to continue borrowing money and cashing out to buy more houses, you'll be getting hit with a lot of appraisal fees.
Cons: Every banker I've ever talked to says the entire group of properties have to be appraised individually to ensure they still have enough combined collateral to support the loan. Perhaps if you have a group of 10 and you think 4 of them by themselves are enough, you could just have those 4 appraised. If you ever want to sell a property to raise cash...then the bank has to do an appraisal on the other 9. Basically, any time you do something that changes the nature or quantity of the collateral, it triggers an appraisal.
The only real advantage I can think of on a blanket loan is it only has one closing fee vs. closing fees x X-properties if you did them individually. Maybe it dings your credit slightly less since it's one loan vs. 10? I dunno. Never had one personally. --173.19.xx.xxx |
RENTAL HOME FINANCING (by Chris [CT]) Posted on: Sep 19, 2017 1:09 PM Message:
My mortgages are all commercial in various LLC's. We found a good bank that likes commercial loans and keeps them, ie they are in house portfolio loans.
The nice thing about portfolio loans is they are actually simpler to close than conventional and the terms are very negotiable.
Whats the value on your houses? If they are sub $100k each I can see them wanting to do a blanket loan. The dollar amount is to low for a commercial loan to be worth while. I can also see the cons, if you want to sell a house you have to adjust the loan. Pre payment penalties in the commercial world are normal, just get used to them. Mine are 5% for the first year, dropping 1% every year after that. Closing costs can also be pretty high, get used to it.
IDK I'd figure out the houses you don't plan on selling and get a blanket loan on them. --24.45.xxx.xx |
RENTAL HOME FINANCING (by Pmh [TX]) Posted on: Sep 19, 2017 1:49 PM Message:
fyi: on commercial you can negotiate non-recourse --104.218.xxx.xx |
RENTAL HOME FINANCING (by David [MI]) Posted on: Sep 19, 2017 5:25 PM Message:
if high closing fees are a problem on blanket loan, you could do one in conjunction with a purchase and have the seller pay closing fees (which would be rolled into the loan) --50.4.xxx.x |
RENTAL HOME FINANCING (by #22 [MO]) Posted on: Sep 20, 2017 4:56 AM Message:
Make a lot more phone calls. If you're a solid risk, finding the right loan is a good possibility. Settling on bank 3 or 4 is settling. Avoid the national banks unless you wish to waste your time with a lot of incompetent people that don't want your loan and will make getting it a nightmare - they're out of touch. Local and regional banks totally get it and want solid, local loans --173.24.xxx.xx |
RENTAL HOME FINANCING (by razorback_tim [AR]) Posted on: Sep 20, 2017 5:08 AM Message:
Try to find a small to medium sized local bank that likes lending on small investment properties. Yes, you will have to sign personally as guarantor. No, won't be 30-year fixed mortgages. But there are plenty of banks willing to lend you money on your existing rentals or new purchases. --70.182.xx.xx |
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Posted on: Sep 20, 2017 3:09 PM Message:
I just received 3 LOI's from 3 different lenders.
One offered interest only. That was in the first line of the paragraph. Automatic no.
The second uses 75% of annual rent less 10% for vacancies less 10% for service fees. The numbers don't work for me.
Third was actually more reasonable and in line with my expectations. 10 year balloon, 1% origination fees, $20,000 upfront due diligence, one year advance taxes and ins, 3% monthly reserves per property (less than we use), 12% vacancy reserves, 70% LTV., $500 /appraisal, DSR 1.8 and yield maintenance premium of 1.15 through payment 114 of 120. I can buy non-recourse for 175 basis points.
They had me right up to the yield maintenance through 9.5 years on a 10 yr balloon. I know there will be properties I will want to rehab and sell well before 10 years.
I think I will take the majority of advice here and look at local small banks and credit unions. The only reason I initially avoided them is they generally do not allow properties to be held in an LLC.
--75.181.xxx.xx |
RENTAL HOME FINANCING (by Jeffrey [VA]) Posted on: Sep 21, 2017 4:03 AM Message:
You may want to try one of the sponsors of this site for Financing. They lend to LLCs and work specifically with landlords and real estate investors.
LandlordMoneyStore.com
--96.238.xx.xx |
RENTAL HOME FINANCING (by Pmh [TX]) Posted on: Sep 21, 2017 6:57 AM Message:
you can negotiate dscr. on hotels I have done, several recently lenders wanted 1:55 to 1:60....I ended up 1:20 on all. different lenders. --166.137.xxx.xx |
RENTAL HOME FINANCING (by JR [ME]) Posted on: Sep 21, 2017 7:11 AM Message:
Another vote for shopping your situation by a local bank. Mine are set up with each property as a separate loan, but there is language that they can take whatever I have personally if I default. I don't plan to default.
I have a 20+ year relationship wth this bank. They keep these loans in house and I am sure make a ton of money off me for them.
They do 100% (or more is fixup money is needed) LTV. No fees. No appraisal done beyond the municipal tax valuation. No prepayment penalties, No junk fees.
I can set the amortization period to anything I like. No balloons. Interest rate is resettable twice yearly to move with prime rate, with a lifetime cap. Currently, the interest rate in in the 6% range. Could not be easier to get the money, one phone call and the money is in my checking account that day. I go in a week or so later and sign the paperwork. I must provide yearly financials.
I am overall, very satisfied with this arrangement.
--192.159.xxx.xxx |
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Posted on: Sep 21, 2017 9:13 AM Message:
JEFFREY:
I have a low tolerance for companies that don't respond to inquiries. I have reached out to the company you recommended 3x which exceeds my normal limit.
It is not dissimilar to prospective tenants...if they are non-responsive in the beginning when their interest should be at it's highest it generally doesn't improve later on. --75.181.xxx.xx |
RENTAL HOME FINANCING (by David [MI]) Posted on: Sep 21, 2017 9:17 AM Message:
Nc investor, what is " $20,000 upfront due diligence" --166.170.x.xxx |
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Posted on: Sep 21, 2017 5:28 PM Message:
It's the price of admission to the dance. It's fairly standard.
It supposedly covers their OOP expenses:
credit reports, property search, and appraisals/bpo's. I figure their OOP is roughly $5,000 -7,500 on due diligence and the rest is bundled and vaguely described so we can't see the profit margin and junk fees.
But I must have skipped over the best part of this particular lender - they require exclusivity. So that once I say "go" I am prohibited from shopping the loan with other lenders even though there is a chance they say no when they complete their evaluation. None of the other lenders have this requirement so one more reason to look elsewhere.
The problem I am finding with some of the small banks and credit unions is they have a cap on how many properties you own, not how many you want them to handle. That pretty much disqualifies me.
I need to keep looking.
--75.181.xxx.xx |
RENTAL HOME FINANCING (by NC INVESTOR [NC]) Posted on: Sep 21, 2017 5:28 PM Message:
It's the price of admission to the dance. It's fairly standard.
It supposedly covers their OOP expenses:
credit reports, property search, and appraisals/bpo's. I figure their OOP is roughly $5,000 -7,500 on due diligence and the rest is bundled and vaguely described so we can't see the profit margin and junk fees.
But I must have skipped over the best part of this particular lender - they require exclusivity. So that once I say "go" I am prohibited from shopping the loan with other lenders even though there is a chance they say no when they complete their evaluation. None of the other lenders have this requirement so one more reason to look elsewhere.
The problem I am finding with some of the small banks and credit unions is they have a cap on how many properties you own, not how many you want them to handle. That pretty much disqualifies me.
I need to keep looking.
--75.181.xxx.xx |
RENTAL HOME FINANCING (by razorback_tim [AR]) Posted on: Sep 21, 2017 6:03 PM Message:
NC INVESTOR - based on a couple of comments you've made it sounds like when you are talking to your local banks you are talking to someone in the regular mortgage division, not the in-house commercial division. You've stated that they don't want the property titled in an LLC and that they limit the number of properties that you own. That sounds like secondary market restrictions to me. Banks lend to LLC's every day. I don't see why they would care how many properties you own as long as you are financially healthy. In fact, the more properties you own and the longer you've been in the business the better they probably like you because you're less risky than someone who is new to the business. I've had at least a couple of dozen loans from banks in the name of my LLC's and have never had an issue. Yes, I've had to sign personal guarantees, but the loan has been to the LLC, not to me. You need to be talking to the people in the bank who are lending money to local businesses - construction companies, manufacturers, machine shops, body shops, etc. Those are the people in the bank who can get you the money you need/want. --70.178.x.xx |
RENTAL HOME FINANCING (by GKARL [PA]) Posted on: Sep 22, 2017 4:46 AM Message:
I've two properties that have commercial financing; one of which is owned by an LLC. Both properties were financed by my local credit union and I've a good relationship with them. I had to personally guarantee both loans and the terms were decent; 80% LTV, 25 year amortization, 4.50% interest rate that resets every 5 years. One of the properties is nearing the end of the reset period, so I'm going to refi it and was quoted 4.75% for seven years. I think I want to lock it for 10 years and would be willing to pay 25 to 50 bp more for that. That will be a point of negotiation with them.
My experience is that the local banks and credit unions are the only options for commercial lending as the big banks aren't interested unless the loan size is at a certain level. The local guys know their market better and are grateful for the business. --207.172.xx.xxx |
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