Can you roll a hard money loan into a portfolio loan?

[Jeremy Keeler]

Recently after years of reading and listening to books and podcasts on owning rental property, I decided to start taking the first steps towards making a purchase. 

For years I've heard about folks buying and rehabbing with their own money, private money or hard money, then doing a refinance with an FHA backed mortgage note. They buy the properties in their names, then when they hit their lawfully mandated limit of ten properties(or ten in the name of each spouse) they move the deeds into an LLC, thus freeing them to continue to score government-backed loans on the cheap, giving them healthy cash flow.

That's the way I've heard about it being done, and it makes sense if you believe in leveraging other peoples money to build wealth. But here's the problem. The due on sale clause. Now before anyone says they have never ever heard of a bank executing that clause, take a gander in these forums and you'll see that not only does it happen, but the frequency of the DOS clauses being executed is picking up speed. The reason as best that I can tell is climbing interest rates. With rates going up, possibly another 2 full points in the next 2 years, mortgage account managers are wringing their hands looking for ways to get out of cheap loans they issued over the past decade. They're looking for things that break the loan contract, like due on sale clause triggers, such as "We made a loan to John Doe, but now our collateral is deeded to AWESOME LANDLORD LLC? Eff that! Call that note due!

Do I think they want to foreclose? probably not, but what they can do is force you to move it back into your name or maybe if they can get away with it, get the property into a higher interest note.

The point is, it's at their discretion. I am not going to build a business that could come crashing down based on the discretion of a pencil pusher at a bank!

So where does that leave me if I want to use as little of my own money as possible to pick up properties? Can I just buy the properties cash and pay for the rehab work with my own cash? Yeah, one, maybe two and then what? I've exposed myself to maximum risk by basically emptying out my bank account to get the houses. Not exactly leveraging is it?

So my quest to solve this problem has led me to portfolio lenders that loan out their own funds and therefore don't care if the loan is in your name or an LLC or whatever, it only has to make financial sense to them.

So, considering that I would still like to use hard money lenders to buy and rehab while using as little of my personal money as possible, is it possible to get a portfolio lender to give me a 30-year note and cash me out of a hard money loan? This is assuming, of course, the rehabbed property appraises high enough to satisfy all my costs or most all of my hard money costs.

I have not called up any portfolio lenders to ask them, but I know there are quite a few in these forums.

Thanks in advance!