Portfolio loans when just starting out

[Alejandra Roca]

Hello, I'm just starting out in real estate investing. I have plans to acquire 30 properties in the next 5 years. I'm looking to find a good way to finance the deals once the cash runs out. How do Portfolio Loans work and would it be a good option for someone who is just starting out? I'm interested in taking a loan through my LLC.

[Michael Garofalo]

Hey Alejandra,

Portfolio loans are great, I just started my investing journey about a year ago and am dealing with a portfolio lender for a property that is held under my LLC right now. My advice would be to buy as many properties through the LLC as you can with cash, and then go back to the portfolio lenders after you have tenants in place with signed lease agreements and do cash-out refinances.

The terms of a commercial loan won't be as favorable as traditional financing. Interest rates will be a little higher, and the amortization schedule will likely be 20-25 years, with a balloon repayment by or before year 10. But you'll get to establish a relationship with a local bank (or several) and potentially open the door to obtaining a business line of credit down the road once you have built up trust with the lender. Also, the paperwork required for commercial loans through a portfolio lender (at least in my experience) is much less than going through one of the big banks, since they keep everything in house.