Updated almost 9 years ago on . Most recent reply
Portfolio loans issues, looking for ideas
Hey folks,
This has heavy overlap with the Creative Financing section but... I am not (yet) looking for a group up creative plan so much as looking for creative solutions to a conventional problem.
The situation is I found a lender with a product that was fairly unique in that it was a cross collateralized portfolio loan with NO minimum asset value. We are buying in Memphis and you can get a decent house there for 40-50 grand and so we are in contract on several. But about three weeks into the process we find that they requirements changed and they now require a 50k minimum asset value- which is about industry standard I think. We are now two weeks from closing.
Now we can probably pull together sufficient cash to protect the deals and then look for another answer. But, we are all about leverage and cashflow so this is really sub optimal.
Ideas I've had so far: (I tried cursing loudly- it did not work)
Offer a foreclosure deposit of some kind to protect the lender in the event of a foreclosure. Was told the 50k number is designed to make it "worth while" to foreclose because even if 40k is a nice house spending 7500 to get it back is a bad percentage.
Larger down payment.
Pull out anything big enough for the existing product, use it on those, then do something else for the rest.
Aanndd those are the things I've thought of so far. I'd like to hit Monday with a solid list of potential solutions.
Okay gang! Hit me with some wisdom!
Most Popular Reply
Very Good idea especially if you are already managing in this type of area in your home town... Moving to Memphis is a HUGE plus since you are picking up several of these at one time. You will do AWESOME!!
As far as the loan goes I would take the ones out that are under the $50k mark and close on the ones that are over $50k then possibly come back in a few months with the cash flow made from the others to pick them up one by one as a straight cash purchase.. You do run the risk of losing out on them to other investors if they are sold before you gathering up enough cash to purchase them but while you are here managing the others that you did purchase in the portfolio loan you will definitely run into a TON more great deals that it will not hurt as bad as losing them out of this deal trust me deals are all over the city and with you being the BOOT ON THE GROUND you will gobble up the deals left and right... I would never suggest anyone to put themselves in a cash strapped position to get a deal closed regardless of what kind of deal it is you must have adequate reserves and less stress with coming up with cash that you had already allocated to something else until the lender changed guidelines on you at the last minute.. Now screaming and cursing can sometimes relieve some anguish/tension but look at the bright side you still got a deal on some of the properties that are over $50k closing...
If you don't mind me asking can you tell me who is the portfolio lender that you are using... You can PM me if you like..
Kind Regards
Derrick