Pros & Cons of Portfolio vs Individual Loans with Seller Financin

[Daniel Dietz]

Hello,

We are working on a possible deal of buying a portfolio of homes and small multi families that have a total about 15 units with a value of about 1.25M. The seller is considering Seller Financing but we are not down to fine details yet. I am not familiar with the details of how Portfolio Loans work yet, but will also be talking to a couple of local lenders who do them soon. Part of my thoughts are when it comes time to refinance when the balloon comes due, and also the cost associated with doing one portfolio loan vs a separate loan for each property. The properties would be held in a multi member LLC.

A couple of my questions I have are;

• How would closing cost compare for individual loans compared to a portfolio loan?
• I assume with a portfolio loan that all of the properties would be encumbered by the one loan. Is there a way to make extra payments on just one (or do a lump sum) to get it out free and clear from the portfolio loan. Thinking if we wanted to sell one or get the equity out of it.
• What would be the pros and cons of going the portfolio loan?
• What would be the pros and cons of going the traditional one home one loan route?
• One big one is when say in 5 years we have the balloon come do and the need to refinance which would be more favorable in a traditional portfolio lenders eyes?
• How would either way affect the 'conventional loan limits' for buying future properties? Each of the partners only have 1-2 conventional loans including our own homes and might want to look at more properties after these.

I have also been planning on individually buying a 2-4 unit outside of this deal and utilize FHA's low down owner occupied financing. Would it be better to do that before this deal as far as DTI etc... or is that not how portfolio loans to an LLC I am involved with are looked at?

Thanks, Dan Dietz