Portfolio loan house flipping- what i do wrong?

Question

I called a bank mentioned on BP that supposedly does portfolio loans for flipping.  I said, "i'm interested in getting a loan for house flipping and mentioned that i'm a first time flipper."  The call was over before it started.  What i do wrong?

I got excellent credit, good income. Low DTI.

Must i tell the bank the loan is for flipping?  I assume portfolio lender will not do rehab loan wiht property like hard money lender would... so then i must get 2nd loan for rehab yes?

For my first property i/m thinking i should start an LLC yes?  Have them loan to that with a personal guarantee?

Account Closed · Answer

@Scott A. I agree with @Mike Hanneman it seems like you are giving TMI. Let them ask for the info they require before you disclose.

As @J Scott stated Lenders won't disqualify you because you are inexperienced. They'll most likely give you a higher interest rate and origination points to cover themselves but they will still work with you. Just be sure that you're contacting the right type of lender for what it is you're looking to accomplish.

Hope this helps..

Best Regards,

Mike Hanneman · Answer

I'm not saying to lie to the banks just dont play all your cards at once. Only give them the info they ask for or is required.

Mike Hanneman · Answer

You are giving the banks TMI ( Too Much Information ) if you want to use a bank for a conventional loan just say you found an investment property if/when they ask. You don't need to say you are going to flip it, Banks think right there that you will need a construction loan, even if all you're doing is cosmetic fixes. The comments above are the more desirable route to go for flipping houses but with a conventional loan it gives you other exit strategies as you will have lower cost of financing already in place.

Scott A. · Answer

BUt... i do have a completely different business in the Tech market that is successful, shows good numbers and has been around since '08.  So... maybe i could get a business loan for that?  And do my first flip under that LLC instead of creating a new one?  An LLC can do any business it wants far as i know...

John Kent · Answer

@Scott A. for flipping use a short term loan such as hard money or a line of credit. A traditional bank may offer a business line of credit that you can use for flipping but they will require that your business be established and show a positive track record.

A portfolio loan is just as Wayne Brooks described and generally speaking a hard money loan would be considered a portfolio loan.

When it comes to short term loans for flipping the interest rate is not that important. The other loan costs and the structure of the loan are the determining factors. Easier loan terms and lower fees are often worth an additional 2% - 3% in the rate for a short term loan.

A private money lender or hard money lender is the easiest way to start until your business can obtain a line of credit.

Scott A. · Answer

So do i simply say i want a home loan on an investment property, then they would do it? then a few months later i could pay them back when the house flips... but they may get a little pissed off... kinda like that?  Or do i simply go after hard money?  I have read portfolio loans for house flipping are common all over BP... and the rates are much better than Hard money loans... if i could do it that way.  I'm confused.

Wayne Brooks · Answer

Just to be clear, a "portfolio loan" is simply a loan where they are lending their own money, they don't sell the loan off in the secondary market, and will keep the loan to make their money off the interest.  Banks don't typically do "flipping loans" because they're Not interested in making loans that will get paid off in a few months, they want them to remain in place for years, hence your problem.  Portfolio loans are generally sought after by "buy and hold" investors, since they don't have all the restrictions imposed by the secondary market loan buyers (Fannie, Freddie, etc.).

Scott A. · Answer

I called TD Bank and Florida Community Bank, asked for a "flipping portfolio loan" and they never heard of it... Then i asked do u do any house flipping loans at all?  They said no.

J Scott · Answer

Did they say that they didn't do flipping loans?  Or did they say that they wouldn't do a flipping loan for YOU?

Those are very different things.

I can't imagine they would dismiss you simply because you didn't have experience.  Typically, with portfolio loans, experience is a nice-to-have, but not an absolute requirement.

I suspect the bank doesn't do flipping portfolio loans, or there was some other miscommunication.  What was the entire conversation?

Scott A. · Answer

I suppose me saying I'm a first time flipper was a no-no... But basically she said "what u want is a development/construction loan,  for now u should use private money until you can build up your business."