Refinance Conventional Mortgages to Commercial Mortgage

[Ross Drucker]

Hello all,

I've been a member and viewer on BP for a while, but this is the first time I am seeking some help. I currently have 3 conventional loans on 2 rental SFRs and 1 two-family rental. I'm reaching the limits with conventional financing. Does anyone have any experience with banks or lenders that will refinance a small portfolio of one to two family homes with rates that aren't crazy high? I know there are a few big players out there like b2r and colony. Does anyone have good experience with them?

Thanks for the help!

[Albert Bui]

Recently Fannie Guidelines regarding LLC titled assets and LLC obligated loans changed. It used to be that anything 24.99% or higher in ownership whether the LLC was titled or obligated or both still counted as a financed property.

Currently it has changed so that if a property is titled in a LLC and the note is obliagated in the LLC's name that that property and loan will no longer count towards the "financed property," count.

So in theory if you convert your properties into a LLC and have the LLC be obligated on the note then these properties will not count towards your financed properties count. This is atleast what my underwriters have been feeding back to me lately. I was operating under the assumption of the old rule of 24.99% or greater ownership prior.

As Graham mentioned, Fannie is 10 financed properties max and Freddie is 6 max currently.

Use of commercial financing can be a means of obtaining more financed properties. Local credit unions and community banks are most likely going to be your best source of this commercial/portfolio financing when you've exhausted all of your Fannie/Freddie money or you can use them both and in conjunction depending on your preferences.

In my experience local commercial money is usually around 1.0 pt in cost to originate with rates around 4.99-6.50% with 5-10 year terms which balloon thereafter and amortization can be found anywhere from 15-30 years, with most being around 20-25 years. In WA, State I've found a 30 year AM 10 year term with .75 pts no prepay at 4.99% so not bad when I cant do conventional I can switch over.

What I like about the portfolio money is that guidelines are based more off DCR or debt coverage ratio rather than comparable sales which present certain benefits depends on the rent to value ratio in your particular area.