All Forum Posts by: Marty Johnston

@Luke J Nelsen there are a number of Portfolio Lenders who lend on on both 1-4 Unit investment properties, or blankets/portfolio loans across 2+ properties. The ticket here with a lot of these portfolio lenders is the minimum value per door. The portfolio lenders we work with for example want to see a minimum value per property of $65,000/door. In the Milwaukee area, this can sometimes be difficult to meet. Some lenders will go a little lower if the rest of the portfolio values are strong, but that's a case by case basis.

Do you have an example of the portfolio that you can share a bit more on?

Thanks Luke!

@Quincy Jones while both of the above are correct in most circumstances, we have helped many of our investor clients secure 'gap funding' in the form of unsecured personal debt. This means the "no 2nd lien" issue is avoided entirely, as you can utilize unsecured personal debt for next to anything. Some very important things to know however!:

PROS:
- Being unsecured, this is fast funding for this capital - generally 5-7 days
- Can apply for up to two times your annual W-2 income
- Unlimited use of funds (rehab, down money, legal fees, rehab reserves, cash for auction properties etc)
- Re-usable, or payoff (no pre payment penalties)
- No up front fees of any kind, and fees are taken from proceeds, so you dont need liquidity to obtain this capital (but you do need to show consistent W2 income)

CONS:
- Not the cheapest capital. Average rates are between 10-18%. be sure this makes sense for your deal based on the estimate time you expect to hold onto the loan
- Doesn't match well with rental loans - really suited for rehab/strong value add to ensure you can exit the loan without issue - be sure your rehab and ARV numbers work well for 100% financing
- Short-term pay back period - these are 5-yr fully amortizing loans, so be sure the monthly payment is affordable to you (although most lenders won't lend you more than you can handle, as they due a global DTI ratio generally)
- Not all lenders accept Gap Funding, even when in the form of unsecured personal debt make sure your lender accepts this. Many HMLs do, even some of the big names out there, just be sure to clear that up front.

Please be aware, gap funding of any kind can be tremendously costly if you aren't confident with you numbers or the deal. You don't want to over leverage yourself for 100% financing with this type of capital. If you have a "Rich Uncle Joe" - they will always be your best source.

Hope this helps! Shoot me a DM if you want to chat more on this!

@Kaja Baum I think some others have nailed it here - it depends on what you're looking for: Speed? Best Rate? Low Doc (no tax returns or income verification)? Depending on what's most importrant to you, this will also adjust your options. There are lenders with 30-day seasoning periods who can use the new value of a property right away. Some others are 3-mo. Rates for some of these 'Bank Alternate' lenders are between low 5% - high 6% range depending on your credit and the loan amount/leverage requested. 

Credit Unions are also a great choice - check out your local ones. They by nature (typically) don't have seasoning requirements, and also no Pre Payment Penalties! (which is uncommon for Commercial loans btw). 

If you want speed (<30 days closing), the bank alternate lenders are your best option. If rate is your goal, and you are okay closing in 45-60-90 days, then a credit union is probably your best bet. 

All of the above I'm referring to are commercial loans by the way - some will allow you to still close in your personal name, OR an LLC - depends on the institution. PLEASE ignore everyone who says commercial will only lend to an LLC. That's being stated from someone who isn't familiar with the secondary market lenders out there... Same goes to terms - 30-yr fixed is possible through commercial lenders. So while rates may be higher with the Bank Alternate lenders vs the "banks" at a 20-25% term at 4%, your monthly payment isn't that much higher with a 5.5% over 30-yr fixed (no balloon either).

Shoot me a DM if you wanna chat more about this. Happy to talk options!

@PaFoua Vang Xiong PM Sent!

@John Coffey you can absolutely do this with a Commercial Lender. Bare in mind, residential rates are going to be superior (looks like around 3.25% today for an investment property depending on the bank you use) vs the 5-6% range you'll obtain through a commercial loan, but there are benefits to both (residential will also look at your personal income, tax returns likely, pay stubs etc and review your global DTI VS Commercial lender won't care about your personal income, and will be more so lookign to the income of the property, your liquidity, credit still for leverage and rate approvals etc.) Both can probably close in 30 days assuming appraisal turn-times in your area are <15 days. We're seeing 28-days in some counties here in WI for example - 30 days would not be possible there.

Hope this helps!

@Heather Meyer what are the terms you're looking for with a PML? You may have a lot of options here depending on your goals and needs. From there we can point in you a better direction as well, or can better assist you

Cheers!

@Chris John Sounds like a great deal here! This certainly is something that you could do, and you'd have CRE Loan options assuming that the values are there. Also, with the $50,000 in renovations, how much value do you feel you'd be bringing to the property? You could look at a Rehab loan (short term Interest Only) for the purchase + rehab, and then refinance into a permanent financing loan (30-yr type product) once you've completed the renovations. We have a lender we work with who only has a 1 month seasoning, so you could refinance using the new value of the property after 30 days, get out of your high-interest rehab loan, and refinance again in a few years to pull out your new equity if you believe the appreciation will be there.

Options are there, but it really does all depend on the value of the property. You're correct in your estimates of 75-80% LTV on the acquisition. A cashout refi will usually be 5% LTV < than a Purchase or Rate & Term Refi LTV from the same lender (cashout is simply viewed as higher risk).

Hope this helps! Shoot me a DM if you'd like to chat more on this.

Hey Gang,

So I've been a mortgage broker for several years in the CRE Lending space, and I have capital partners I work with who offer 100% CLTV funding for bridge loans or short term, I/O financing. However, I am hoping to know if anyone may have a referral for a solid lender who offers long-term financing (25-30 Yr Ams) who allows for a full CLTV seller carry behind their first.

I understand the reasons why that vast majority of lenders do not allow this - trust me, I do. But I run into the scenario often with clients/investors of mine who are seeking to leverage the seller carry in a 2nd position behind a senior loan, but have only ever found this possible through short-term capital. Wondering if anyone has had luck identifying a 25-30yr commercial loan / lender who allows such a structure? I did a search here on BP first but came up short.

Thanks all.

@Marina Croce this can be a common issue when looking to a conventional / residential loan. It sounds like he may need a bank-alternate type lender who does not underwrite tax returns or income. Is the property an investment property or a primary/second home?

These bank-alternate lenders won't need Tax Returns, pay stubs, W2s etc. Their UW will be based on the asset, rental income to service the debt, and credit for certain pricing and leverage. Rates here are between 5-6% vs the high 2-4% range you'll see from banks or credit unions, but it could get the job done. Still 30-yr Fixed options and capped at 75% LTV likely on a cashout.

Is this something that would help his scenario?

@John Smith where is your credit currently at? Depending on actual scores, there could be different options