Borrowing against unleveraged rental properties

[Dale Cooper]

I work for an LP that owns (paid cash) and operates ten properties in the Albany area. Properties are all between 2-4 units and tenant-occupied. The property manager is great at operations in that expenses are always low and revenue is always high, but he's not good at keeping records or any administrative work.

The LP members want to take out as much debt as possible on the properties while interest rates remain low, preferably in a 30 year fixed. The plan is to use the borrowed money to service unrelated debts, but the real goal is to borrow as much as possible as soon as possible. Conditions on how the money is spent could be acceptable.

Any advice on how to make this happen? I'm looking into local banks and portfolio lenders, but given the poor documentation by the property manager, it will be difficult if not impossible to satisfy conservative lenders.

If I come off as uneducated here, that is because I am. New job, sink or swim. Don't be afraid to dumb down your answers, and if you see an obvious solution here that I missed, its not because I considered and disregarded it. Thanks for any guidance you can provide.

[Robert Leonard]

How long has the LP (limited partnership?) owned the properties? Have they filed a tax return since owning them? That's what any lender is going to look at besides any income statements you or an accountant creates. The bank statements will tell a story all by themselves if your cash flow is going into a bank.

You need to come up with a system that allows you to compensate for the PMs lack of administrative skill. Maybe a 15 day report or an envelop batch of receipts to go to whoever keeps your books to keep track of receipts? Are you in the same town? You have to make the process easy to follow and establish a habit of submitting expenses to whoever keeps the books to get a good accounting of expenses. Times like now when you need to borrow or at tax time can be a pain if you don't have good records.

This is a commercial type of loan that you will need and you will not likely find 30 year fixed. You are much more likely to find 20 year amortization, with a 5 year balloon. Think of it as 5 year adjustable rate loan. The banks don't want to be locked in at today's low rates any longer than 5 years when there's a pretty high probability that rates will be a good bit higher 5 years from now.