All Forum Posts by: Nick Denning

What is the logic in holding Adjustable Rate mortgages (ARMs) and Balloon rates in a rising rate environment?  At some point in the future, rates will rise and/or notes will balloon and your cash flow will be affected.  

Why not hold in a fixed rate, long term note?  Or are the Buy & Hold investors seeking to hold these for less than 10 years? 5 years? 

Thoughts? 

We can help you in Wisconsin... feel free to give me a call or an email. 

Thanks 

@Miguel Castillo The key to accessing long term financing determining what you want to accomplish FIRST before you go shopping.   Not every loan is the same.  How long will you hold the property? Will rents cover the financing costs, vacancies and expenses to allow for positive cash flow?  Will you hold it in your personal name or a legal entity? 

Another key point is to have your finances in order and up to date prior to seeking financing.  Piece-mealing your docs together causes everyone more strife than necessary....organization is Key in this business!

@Matt Holmer Financing is always a factor in cash flow and needs to be modeled into your long term plan. If you can find a local bank that will allow you to obtain "bank rates" while financing in your LLC, then you are in pretty good shape for cash flow, costs AND liability standpoint!

Best of luck and always feel free to use me as a resource if you need...

Happy Holidays!

@Matt Holmer  Full Disclosure, I am a Portfolio Lender that Specializes in these type of Loans....but that being said, Rates are between 6.5-8.50% 30 year fixed/30 year amortization with a 1 year Prepayment penalty.  

There are other Lenders with 30 year fixed and shorter Amortization schedules or Balloons out there with lower rates but they are usually Small Community Banks. They are not always the easiest to work with (Compliance and documentation standpoints) and are very sensitive to Rate increases (think Fed funds). Some Community banks limit the number of Properties (or $) to each Legal Entity or charge Audit fees to review your LLC structure. Be careful to ask for Disclosure of ALL fees associated with the transaction! The devil is always in the details....

In short, Portfolio Lenders can be a useful tool for long term investors where the Community Banks/Institutional banks are not the best "fit" for your long term Portfolio.  

I hope this helps!

@Matt Holmer

As buy and hold long term investor, I seek ways to acquire and finance properties via long term (no balloons) financing with fixed rates.  This allows me to "Set it and Forget it" without worrying about rising interest rates or Terms coming due in the future.  Since the Property pays the interest, fees, etc it is part of the long-term cash flow.  Assuming that the Rents increase annually (or at least stay flat), I am ALWAYS ahead of the curve.  

Personally, I buy, hold and finance in an LLC for liability purposes. Changing ownership "mid-stream" is usually problematic for the current lender.

As always, consult your Legal professional for advice. 

@Adam Sporinsky  Always willing to help!   Reach out anytime....

Welcome @Adam Sporinsky !  Lots of great people with plenty to offer here on BP...

I would have to agree with @Sharad M. about property location.  Many areas change block-by-block and you have to make an assessment based on each individual property location.  Blanket statements about areas can limit investor potential....

Small business lenders can lend to LLCs with the LLC "members" as guarantors. Many of these lenders have rehab and long-term financing.