Portfolio Loans & Lenders

[Leonard Sanford Jr]

Happy Tuesday Fellow Investors,

I am a brand new real estate investor, and have been learning about the different types of financing to help me in acquiring my first rental property. One of the types of financing that sparked my interest is Portfolio Lending. Although my already accumulated student debt is in deferment (I am currently in school now), I figure that this may be my best route to get started as opposed to going with a conventional loan through a bank . Currently, I am looking to acquire a 12 unit apartment building in a local city in my area. I have run a deal analysis and the math makes a lot of sense. Has anyone else used this type of financing to close on this type of deal? Or are there other types of creative financing, such as a private or hard money lender, that may work better? Thank you in advance for any tips or feedback that may be provided!

Respectfully,

Leonard Sanford Jr.

Founder, Forward Thinking Solutions, LLC

[Guifre Mora]

Originally posted by @Leonard Sanford Jr:

Happy Tuesday Fellow Investors,

I am a brand new real estate investor, and have been learning about the different types of financing to help me in acquiring my first rental property. One of the types of financing that sparked my interest is Portfolio Lending. Although my already accumulated student debt is in deferment (I am currently in school now), I figure that this may be my best route to get started as opposed to going with a conventional loan through a bank . Currently, I am looking to acquire a 12 unit apartment building in a local city in my area. I have run a deal analysis and the math makes a lot of sense. Has anyone else used this type of financing to close on this type of deal? Or are there other types of creative financing, such as a private or hard money lender, that may work better? Thank you in advance for any tips or feedback that may be provided!

Respectfully,

Leonard Sanford Jr.

Founder, Forward Thinking Solutions, LLC

Leonard,

Its a loaded question with lots of avenues. 

Let me elaborate and give you insight into the lending world through the eyes of a lender. To begin, investors and lenders speak different languages once you master each other's language its easier to close a deal with any lender or know if the lender is the correct one for your current scenario. So doing the math of a property is one part but you must also do the math for your own financials. That's the key you must know what you are qualified for and look for the correct lender under your known financial situation. 

Qualifying deals is not easy. Every real estate transaction is unique, and many include property or borrower issues that limit the number of available lender options. So it may seem portfolio is the way to go but not all portfolio lenders lend on multifamily or do less than 30% downpayment or don't allow inexperience investors to acquire large multi-families or require equal value networth or reserves. So with what I just mentioned you can see that you might be getting to a dead-end quickly or losing the deal because the lender cant close on it.

Regardless of it's conventional, hard money, private or portfolio qualifying for such loans within the lender's capability they all have similar complications or qualifiers.  

Start with the basics

• What is the borrower’s motivation for financing? How much downpayment are you planning to use 20-30-40%?
• How many months in reserves do you have?
• Do you need rehab funds?
• Identify your FICO score and credit history. Don't guess know what it is.
  
• Making sure your potential lenders do business in the property’s state. Then check the city and county population – if the property is located in a rural area, there will likely be a smaller number of lenders willing to transact.
• Is there an issue with the property or borrower that might limit the number of lenders?
• What are the real estate type and current use of the property?
• How many units (multifamily) and/or what is the occupancy level and tenant mix?
• What is the NOI (Net Operating Income)?
• What is the square footage?
  
• Does the property require rehab or repositioning?
• Do you have photos of the property or have you inspected the location?
• Are there potential environmental issues with the property?
• Will this be an investment or will you occupy the property?
• Do you own your primary residence?
• Do you have an executive summary in relation to RE?
• Will the property be self-managed or professionally managed? 
Supporting information and documentation

• How was the value of the property determined?
• What information is available to support this value?
• Do you have the rent roll? what is the DSCR?
  
• Do you have a personal financial statement?
• Is the property listed by a real estate professional or is it a private sale?
• · Is there a purchase contract in place?
• · What is the closing date per the contract?
• · Is there a financing contingency?
• Property operating statements – current and projected upon plan completion
  Tax returns – last two years tax returns (If the property is owner-occupied)
  Project plan to stabilize the property, timelines and cost withdraws
  Projected stabilized rent roll and operating statement