Portfolio Loan: Cash-Out Refinance?

Question

Hello BP Peeps!
I'm a newbie to real estate investing and would appreciate any knowledge you can share. I bought a single family and duplex in the past few months and would like to apply for a Portfolio Loan: Cash-Out Refinance on both Properties. I called a handful of local banks. Flagstar Bank called me back and sounded enthusiastic about lending me the $.

Two Questions:

- Does anyone have any experience with Flagstar Bank?

- Is it wise for me to ask for a Cash-Out Refinance Loan? I'd like to buy more properties and use some of the extra funds to pay off the loans on these first two properties

Brian Garrett · Answer

It can sometimes be a challenge to find a lender on $50k properties so you may end up having to bundle them together.

I'd call around though there's plenty of investors here on BP who got conventional financing on $50k properties.

Brian Garrett · Answer

Is there a reason you need to bundle the properties together in a portfolio loan?

You will get more favorable terms/rates through a traditional cash out refinance.

Upen Patel · Answer

@Jay Helms The issue you pointed out is very valid and one that most people don't think about. Not to mention the risk associated with the commercial portfolio (aka blanket loan, cross collateralize loan) having an ARM or balloon loan term. What are you going to do when the current fixed term ends and you are staring at higher rates, and the cost associated with multiple refi's over the life of the property.

What folks should be looking for is a residential portfolio loan. It offers 30 yr fixed financing and is per property, so no issue with selling something when you want to.

@Aram Velazquez

*** Moderator - This is not an ad/solicitation. Just sharing information with the community so folks know the options available to them. ***

Jay Helms · Answer

@Aram Velazquez - congrats on your success! I don't have any experienced with Flagstar but I recently, like you, started inquiring for a portfolio loan. I was turned off when I realized that if I wanted to sell any property underneath the portfolio loan, it would be a BIG hassle. My initial thought, is no problem, I'm buying and holding...FOREVER. However, recently I was offered 2X what I have in a property and now under contract to sell it.

Just want to make a point you may limit your exit options by doing a portfolio loan. Something I had not thought about or heard. What are your thoughts and what does Flagstar bank say on the subject?

Sean Tarpenning · Answer

If there are no PPP, It doesn't sound like a bad idea to go for 80% leverage conventional loans. PM if you have anymore questions, happy to help.

Aram V. · Answer

Hi Sean,

Not sure how to accurately calculate my leverage but -

HOME#1, Single Family Home $50k -  50% Cash Down / 50% - Small Loan from Discover Loans

HOME#2, Duplex $60k - 20% Cash Down / 80% - zero % business credit cards - Fund&Grow for 12 months membership

All unsecured loans.

Sean Tarpenning · Answer

We have worked with Flagstar bank out of Kansas City. They have been great through out the process. How much are you currently leveraged?

Brian Garrett · Answer

The property being in an LLC is part of your challenge when calling banks for traditional financing. Conventional lenders (Fannie/Freddie) don't lend to LLC's and need the property to be in your name personally. So if you're looking to go through a conventional program you'll need to transfer the properties to your name first. If you do not want to do that and/or cannot qualify for traditional financing anyways then you can refinance them individually through a commercial loan or you can go with your original plan of bundling them together and using a portfolio loan.

Check with credit unions too they often have more flexibility than banks especially more so than the major branches.

Aram V. · Answer

Thank you Brian. Yes, pretty tough, I called about 12 to 15 banks and most laughed at me or gave up at the first technicality "Property in an LLC....NO, You don't live in the same state...NO. The houses are how much? ... NO". These are the first guys to actually give me a chance. But I'll keep searching in the forum... I'm definitely open to lenders.

Aram V. · Answer

No, there is no reason for bundling. I guess I'm trying to kill 2 birds with 1 stone. These 2 properties are both about 50k each.

Portfolio Loan: Cash-Out Refinance?

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