Financing more than 10 properties

[James Cerenzie]

All,

I'm looking for a little assistance on several questions related to financing.

I am approaching the limit of 10 financed properties (under traditional loan programs), and looking for recommendations on how to finance #11.

Consolidation of the portfolio and paying off a mortgage is my last resort, as these are short-term solutions to a larger roadblock. Also I understand private money is an option, but this comes with a rate hike. Ideally I'm looking for a < 5% IR on a 15yr fixed. If 15yr fixed is not viable, I am open to shorter terms, or an ARM.

I have excellent credit, 35-40% Debt to Income (including mortgages), and am buying and holding properties long-term (no flipping). 

Also, I have an LLC and business credit card so obviously would like to eventually start building the credit of the business.

Options I've Already Explored

- several national banks

- MACU and American Family

- Zions Bank

- local mortgage broker in St. George

Thanks for your assistance.

James

[Kevin Romines]

I just went through this very question with my underwriting staff and there are some interesting answers that came up. According to Fannie Mae, if you own more than 25% of an LLC that the properties are financed via a portfolio loan on, you must still count the properties in the 10 financed property rules. However if you own 25% or less, then you don't have to count the properties that are in the portfolio loan so long as the financing is in the name of the LLC.

Here is were it gets interesting, if you have the homes in a Corporation or a Sub S Corp and the portfolio financing is in the name of the corp / Sub S, then you don't have to count them into the 10 financed property rule, even if you are sole owner of the corporation?. 

Why Fannie makes a distinction between an LLC and a Corp / Sub S, I don't know and it seems odd to me, but so long as I can clear my borrowers slate and do a brand new 10 conventional loans for them at great rates, sounds good to me!!! I even clarified that I read the guideline correctly and was told by the underwriter that I did, so odd, but great news!!!

I did some research with some hard money lenders about a year ago as well. I was looking for some lenders that would fund 100% of the purchase and rehab if the purchase was discounted enough that is was a smoking hot deal. After hearing about their standard LTV's and terms, I did have a few that told me they would fund 100% of the purchase and rehab if you got a good enough deal. I'm digging through my notes trying to find that research, but I may have to spend some time on the phone with them again to nail that down as I cant find my notes on it. But I remember that 3 or 4 said yes, they would do 100%. Some said they would cross collateralize to other properties in lieu of requiring skin in the game?

I want to create a clear, easy path for my investors to pick up highly discounted properties with 100% hard money for the purchase and rehab, I will provide the take out refinance, and when they get topped out, I have a handful of portfolio lenders that will take on the properties, clearing the slate for new conventional loans on the new purchases. This thereby creates a perpetual machine where one can buy as many units as they wish, all of which should cash flow extremely well and sit back, keep feeding the machine and growing your wealth. I have several local portfolio lenders that do a great job on that end, so now I need to either find my notes or make the calls again on the hard money and I have then got all pieces of that puzzle nailed down!!!

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