Portfolio loans and things to be aware of.

[Jay Hinrichs]

@Steve Vaughan  Steve i think we have had this conversation before.. One of my Vendors called me asking for some advice.

he had rolled up a bunch of his SFR's to ( for lack of better words) a Corevest type portfolio loan.. And what he is finding out is the

loan covenants are quite a lot of work.. and even worse for him .. is it has him in somewhat of a quandary as he has tired of this portfolio and

to maximize return of course he needs to sell them off pretty much individually..  He is relating to me trying to get partial releases has been

very tough thing to do.. and on top of that it throws off his DC ratios.. so he is kind of stuck.. and very frustrated and frankly wish's he never

rolled up to so many units and used this cheap interest rate financing but very tough covenants..   Quarterly reporting and other very

intrusive things he has to go through.. along with missing numbers there can be cash calls.

I think you had talked about this and how you were retiring those style loans.. 

I am sure there is a happy medium here but seems to me once you take a bite of that low interest rate apple your stuck.

So thinking the BP community may want to really read the fine print on those type of facilities and really understand what it means

For me I have been doing reviewed financial statements for years so its just part of our business model and of course we have net worth covenants we have to

adhere to as well.

[Jay Hinrichs]

Originally posted by @Ned Carey:

@Jay Hinrichs I just refinanced 6 properties with Lima One yesterday. i was sick and didn't read the loan docs. I hope there are not hidden land mines that I didn't know I would be getting into. the 

the company that I am referring to had about 50 homes so about 3 mil or so.. on a 6 loan portfolio probably not a big deal.

I always though negotiate release clauses up front..  just the old developer in me.. lenders wont offer it then when you want to peel one off it can be a bit of arm wrestling..   Many times on the release language we pay 110% or 120% of balance .. we do this in new construction subdivisions so that the last 20% of the lots are free and clear by the time we go vertical.. gives bank more security and cuts down on our interest carry a tad.. but also cuts down on cash flow of course..  Bank figures if market shifts and they are out and we have free and clear lots then we both survive.