Seeking advice for financing in Illinois

[Nicholas Pantaleo]

This is my first post as I am a relatively new member to the site, even though I have listened to the show for a couple years now. I am finally getting started in real estate and am looking for advice or a funding partner. My current partner and I have 2 condos under contract for $60k each and currently renting for $1k each/month. With taxes of $2,200 each and HOA of $239 per unit, it seems like a pretty good cash flow opportunity. It was an off market deal and they are likely worth $80k+ each as well, the seller recently lost her husband and just wanted to get rid of them. We were going to do traditional financing, but the HOA reported that 92% of units are rentals, thus making it a non-warrantable condo, hence our predicament.

We have a couple financing options lined up.  One is a 10 year loan with 25 year amortization payments.  It is fixed for the first five years but then adjustable for the next five with the balloon payment.  This seems like a rough way to deal with a buy and hold having to refinance down the road in a rising interest rate market.

The second option is to buy it in cash then refinance out with a traditional bank on the wealth management side. My friend is a banker and verified they could do this up to 70% LTV at 20 years fixed even with non-warrantable. We could possibly pull out all of our money in this scenario, but more of the cashflow would be gone due to shorter term.

I could also look at hard money loans here, just haven't explored that option any more than the 3 featured for my state on Bigger Pockets website.  7% at 30 years seems to be what is coming up.

My partner and I would consider private funding or even giving up a majority of the deal to put none of our own money in as two other options.  Our long term goal is to build a portfolio of buy and holds.  Any advice for moving forward would be appreciated.

Thanks!

Nick

[John Warren]

@Nicholas Pantaleo the issue you are going to run into is that most local banks will offer you their "portfolio" loans which are exactly the same as the loans they offer for apartment buildings. I actually would love the 25 year am, 10 year term, 5 year fixed loan you are describing, and I have loans similar to that on my Berwyn apartment buildings. 

A lot of times the devil is in the detail on these loans. For instance, you can get provisions that cap the amount the interest rate goes up when the term is up. Financing terms are very flexible in these commercial loans, and everything is negotiable.