Cash-out refi of rental property

[Daniel Alvarez]

I asked a broker to quote a refi for one of my properties both as a rental and as a primary, to see what gives. The only difference was the interest rate on the rental was 62.5bps higher. I was anticipating a higher rate but was caught by surprise by the spread, which I guess implies a considerably higher risk...

I understand during bad times an owner will walk away from a rental property before a home. On the other hand a rental offers additional income (not guaranteed, of course). 

Curious if there're better ways to go about this. Are there specialized lenders for investors out there? Would presenting the lease agreement help out? Market stats re dom?

[Chris Mason]

Originally posted by @Matt M.:

@Daniel Alvarez

I attempted to get the loan thru Quicken first. Fees/closing costs were $4500, plus they wanted to escrow my taxes, another $1500 up front.

The small bank commercial loan was a no brainer for me..

 When you pick the largest mortgage bank in the country that's known for having "meh" pricing to fund the largest mortgage marketing budget in the country with hundreds of script-reading LOs in cubicles who have all signed (& this is lawful) do-not-compete/do-not-broker agreements, yes commercial financing will be better. heh.

If I ever went back to grad school and picked marketing as what I'd study, it would be how a large enough marketing budget can offset almost any other hurdle a business could possibly have, and Quicken Loans would be my case study. And this isn't me talking smack, they've built a VERY successful business by doing nothing else than having the best marketing that's out there for their product!

Don't get me wrong, their commercials are stellar. Huge production values, hilarious, witty, disarming, all that. But not free or cheap to keep plastered all over my and your facebook feed. That $4500 was just them having you pay for them to clutter up your own facebook/google/instagram/podcast feed, nothing more, nothing less. 

Most of the action in mortgage loan originating is keeping costs down. All of the money comes from Fannie Mae, it's just a matter of how many intermediaries and expense items are between the money and the borrower. Run thin, as thin as possible. Federal law says there has to be an LO, so I'm there no matter what. California law says my license must be hung with a California real estate broker (stupid) to be 1099 and broker mortgages, so that expense is also there no matter what. After that, as little middle management as possible is best. Use things that are turnkey and cost effective: $125/mo is my website, email server, loan application, document portal, calendar scheduling app, all the little pretty bells and whistles that consumers expect you to have, and then you gotta read a book a year ($25/yr) on SEO since that is always changing. $60/mo is the loan origination software. $60/mo is the interest rate comparison software that pulls rates from hundreds of lenders. Doesn't take much else - Sure, you gotta wear pants to work, so there's that.