Financing Strategy from 1 to 36+ SFHs

[Blake Ramsey]

Real estate requires capital and time. All 36 SFHs homes in my portfolio required 20-25% down with an average purchase price of $270k but the path to scale comes with inevitable financing challenges. Here is one avenue for how this can be accomplished:

Properties 1-4: GO GET THE RATE! – Take that 20% down with insane rates all day. I did most through Guaranteed Rate but any large lender will be similar. I have always been told the lenders can loan up to ten properties but find past 4 gets very difficult (If you have a partner put one on each name to get 8)

Properties 5-20: GO LOCAL! -- Look the main point is to get the loan and stop worrying about the rate as much. Getting leverage is better than no leverage. Local banks are a great option for loans at this point as they know the local area and can assess the risk of the loan in house. I tend to find above $1M per investor these local banks start to worry about over leveraging them sells to one person. That is okay, just ask for another bank and they will be happy to give you a reference (never hurts).

This loan will be commercial with a 30-year amortization and 5–10-year balloon. There is likely no prepayment penalty which is great but you'll likely have to sign-off personally.

Properties 20+: CASH OUT WITH THE BIG BOYS:

Hopefully at this point cash-out refinance is needed to start scaling quickly. Although it is possible to still acquire and refinance with local banks it becomes hard and annoying to go through the process. Plus, how many local banks are there?

Therefore, working with a large real estate lender (such as CoreVest..if you find a better let me know) opens many doors.

1 Portfolio Loan with cash out:

All of your individual mortgages become one mortgage associated with an LLC which will be re-appraised at current market values giving the opportunity to cash-out.

Details:

-Non-recourse! I like to think of myself as an official partner of the bank at this point.

- All assets are removed from your name which will normalize your FICO credit score

-They will require quarterly updates on your books

-5-10 year balloon is the norm but expect prepayment penalties

- Lender holds 3 months of reserves

Here was my breakdown when first exploring this: https://www.biggerpockets.com/...

Properties 20+: PLAY WITH THE BIG BOYS:

Flush with cash after the cash refinance and hopefully additional capital the number one priority is acquiring properties. Conventional avenues (i.e rocket mortgage) and local banks could be an option again as nothing is in your name. But a Bridge loan is the best option for scaling quickly:

Bridge loans are essentially a line of credit and sellers will treat it this way as a 20-day close is much faster than any conventional mortgage. Also, when they see a multi-million-dollar credit line they know you are serious.

Once the credit line is used or the term nears the end cash out refinance into a portfolio loan. Rinse and repeat.