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Updated about 3 hours ago on . Most recent reply
Commercial 5-year ARM's - Please tell me there is a better way!
My wife and I are 2.5 years into real estate investing in Michigan. 1 Rental, 1 fix and flip on which we just received our first offer!! Yeah!!, and 4 properties we purchased at a tax auction in late 2024. I handle the financing, and she handles the management.
I would really appreciate some direction and advice from this community.
Below are the details of our four tax auction purchased properties. We may have swung a little too big for our first at bat, but we believe in ourselves, have a great mentor, work with a honest builder, and are in a market lacking rental home supply.
However, why can I not find a bank or CU to loan me money on any loan product other than a 5-year ARM balloon with a 15 - 20 year amortization? In order for my numbers to work long term, and to make our dreams come true, I need a 15-year loan. I would accept an adjustable rate, or even a higher fixed rate, but this 5-year ARM stuff means I only pay interest for 5 years, then they want me to do it again and again. I believe that to become financially independent, I need to be done paying for these in 10-15 years.
Full details are below...by here is the elevator pitch...
4 properties with an expected ARV of 360K (Appraisals should be back in 2 weeks).
My all in cost for purchase, auction fees/taxes, and expected rehab is 320K.
I am seeking a loan of 240K, which is about 75% LTV of my total cost basis, and only 67% LT ARV.
Cash investment is 110K, and we should get 80K back from the loan with the intent to do it again next year at the auction.
I feel like this is a win-win for me and the bank, but, as I mentioned, they only want to give me a 5-year ARM. I feel like I am missing a puzzle piece. I am super new to this community and any help is much appreciated.
| Rental Property Loan Request Package - March 2025 | |||||||
| Street Address | Bed/ Bath/ Sq Ft | Purchase Price | Auction Fee's & Taxes | Estimated Reno Cost | Cost Basis | Loan Request | ARV |
| Property 1 | 3/1 1008 |
24,750.00 | 2,830.26 | 77,500.00 | 105,080.26 | 78,810.20 | Approx. 100K |
| Property 2 | 2/1 1065 |
16,000.00 | 2,369.40 | 37,500.00 | 55,869.40 | 41,902.05 | Approx. 80K |
| Property 3 | 3/1 1189 |
24,750.00 | 3,070.49 | 58,560.00 | 86,380.49 | 64,785.37 | Approx. 100K |
| Property 4 | 2/1 793 |
32,250.00 | 4,056.79 | 37,000.00 | 73,306.79 | 54,980.09 | Approx. 80K |
| Loan Request Summary | |||||||
| Total Cost Basis: | 320,636.94 | ||||||
| Loan Request (75% LTV): | 240,477.71 | ||||||
| Total ARV: | Approx. 360, 000 |
| Annual Financial Projections | ||||
| Rental Income | Property Tax | Insurance | Maintenance / Vacancy | Estimated Mortgage (15 Fixed 8%) |
| 17,076.00 | -1,577.00 | -498.00 | -1,704.00 | -27,600.00 |
| 13,404.00 | -1,375.00 | -601.00 | -1,340.00 | |
| 17,076.00 | -1,150.00 | -651.00 | -1,704.00 | |
| 13,404.00 | -1,365.00 | -531.00 | -1,340.00 | |
| Financial Summary | ||||
| Total Annual Income: | 60,960.00 | |||
| Total Annual Expenses: | -41,436.00 | |||
| Annual Profit: | 19,524.00 | |||
| Cash Investment: | 110,076.94 | |||
| COCROI: | 17.74% |