All Forum Posts by: Mark S.

@Caroline Gerardo, I'm trying to follow along with your post but am getting lost at certain points.  Let me take it one portion at a time.

Yes, cash out non-owner loans seem expensive right now in upfront fees/costs.  Long-term interest rates seem okay.  

You are correct on the selling of one property.  I'm not planning to do that, but good point.  The lenders I've spoken with so far are very upfront about prepay penalties (generally 3-5 years).

Great question about insurance.  I would imagine I would simply need to provide proof of insurance on each property and could likely keep the same insurance in place that I have now.  Why would that change?

I'm okay if the HELOC gets closed. To my knowledge, there is no demand feature. I would only use it for investment purposes, so if the money is already out, it's out. If they shut the line down before it's tapped, I can still eat tomorrow.

The HELOC I plan to use is up to 10 years interest only followed by 20 years principal and interest. Not sure where you're getting 15 years. Max rate is 15%. They can only hike it up to 2% per year. There is a fixed rate lock feature that can be used up to 3x during life of HELOC that locks in at 50 bps higher than current variable rate. Variable rate is PRIME minus 0.51% with a 3.50% floor. If rates start to tick up and I have a large outstanding balance, I can simply lock the line at a fixed rate 0.50% higher than the then current variable rate - no big deal. No annual fees. No closing costs (promo). I agree with what you said about interest tracing and recordkeeping - already doing that.

Am I understanding correctly that you are saying to poke the servicer and ask them for an exception on my existing loans for the quitclaim to LLC that already happened? Why would I do that? Chances are I'm unnecessarily raising a red flag and they're likely to say no anyway. And if I go the DSCR route, this becomes a moot point.

The LLC is listed as an additional insured. Both my "blue head" personal name and LLC name are listed on the policy. If there's a claim, they will pay the claim. Again, not an issue if I go the DSCR route.

@Howard Montaque, this is awesome.  Thanks so much for posting this.  Just pounded the phones to several on the list and hoping to settle on one soon.

Goal: Restructure existing debt, keep payment around the same, pull cash out for reinvestment purposes (thereby increasing LTV).

How: DSCR loan / portfolio loan. Open to other ideas here, too.

Current Situation: I have 5 SFRs in Memphis, TN, each on 30-yr fixed rate loans.  Weighted average interest rate is right at 5.00%.  Purchased these turnkey properties initially with 20% down (and got these loans) in personal name, had title company quitclaim to SMLLC.  Let's save the due-on-sale for another discussion.  As we all know, we're experiencing quite a bit of price appreciation (even in markets like Memphis, which aren't historically known for it).  I'm considering restructuring the debt on these rentals and pulling some cash out.  

My local credit union that I have a relationship with (and do my business banking with) does not lend on property outside of KY. I've been in contact with a couple of commercial brokers from BP and they have some interesting products, including 30-year fixed loans with similar/lower interest rates to what I have (depending on LTV, etc.). I could potentially kill all the conventional 30-year fixed Fannie/Freddie backed loans and wrap it all into one DSCR loan or portfolio loan made to my SMLLC. Seems like a no brainer, but I'm finding the fees/costs for these loans seem quite high (in the five figure range - like $10K-$15K).

Depending on the LTV, I could probably get anywhere from $50K to $100K out (wide range, I know). Total loan size would be in the $350K-$450K range. With one lender, the fees don't change (need to check with the other one - waiting on a rate sheet from them). My total PITI payment would be +/- a few hundred per month depending on which route I go. These funds would likely be reinvested into a self-storage/mobile home park fund.

As a side note, I am also in the process of getting a HELOC on my primary where I could likely get about $65K-$70K (promotion w $0 closing costs, variable rate right now at 3.50%). This seems like the cheapest cost of capital by far, however, it doesn't really address the built up equity issue with the rentals (my SFR portfolio is sitting at about 55% LTV right now, and I'd like to see that higher).

Bottom Line: I have excellent credit, strong income, and am very "bankable."  From what I told, many people that get these types of loans are either "Fannie/Freddie'd out" or they don't have much (if any) documentable income (and therefore the fees are quite a bit higher).  I'm trying to figure out whether or not it makes sense for me to move forward with one of these products.  Am I crazy to do it...or am I crazy NOT to do it...?  Just feels a bit silly to pay $10-$15K to "get" $50K-$100K when I don't "need" it necessarily.  I've always heard your 30-year fixed Fannie/Freddie loans are like gold, but these DSCR loans seem competitive from an interest rate/term standpoint.

Downsides: The only potential downsides that I'm aware of besides the fees are that if I ever wanted to sell just 1 or 2 properties, when those sales close, the proceeds go towards the outstanding principal balance on the loan (I don't get the cash).  There's also a prepayment penalty for the first few years (which doesn't really bother me as these are intended for long-term buy and holds).  I'm sure I might be missing something here, not sure...?

Positives: On a positive note, doing this would free up 5 conventional loan slots for future acquisitions. My interest rate would be lower (likely around 4.375% to upper 4s depending on LTV). I'd have more cash NOW to reinvest. I would increase the LTV on the portfolio and keep that money working. Once completed, everything would be in the name of the SMLLC (properties, loan, etc.).

Sidenote: I did talk to my residential lender about a possible refinance.  He quoted $3,300 to refinance ONE property, 0.50% lower rate, cash out.  So, on a relative basis, maybe $10-15K isn't so bad considering if I did them all individually, I'd be paying around $16.5K.  

What do you guys think?  What am I not considering?  What other info might you need to share your thoughts?  Thanks in advance.

@Curt Smith, just send you a PM

@John Underwood, any idea whether or not there’s a step-up in basis on those properties when you pass?  Are the LLCs single or multi member?

Thanks   Would that be you?  lol

One other minor detail, if it matters: loans are in my personal name and rentals are in my SMLLC. It'd be nice to have it all under the LLC to be consistent.

Thanks @Curt Smith.  Sounds really interesting.  I was PM’d by someone at Pimlico Group.  They appear to have programs with 30-year fixed loans as well in mid-to-high 4s.  I am looking to keep these rentals long-term.  I’d love to be able to either cash out refi, lower the interest rate, keep the payments the same OR simply refi the loans at current values, lower interest rate, and juice the cash flow a bit.  My weighted average investment property loan is right around 5% (from 4.75% to 5.25% on 30-year fixed).  Just almost seems “too good to be true” that I can refi into one loan at about the same/lower rate than conventional loan.  Other than the prepayment penalty (which I don’t care about), what’s the downside?  I guess having to coordinate/pay property taxes/insurance manually vs escrow, but that’s not a deal breaker, just forces me to remain organized.  

Am I crazy to refi out of my plain, vanilla, Fannie/Freddie 30-year fixed mortgages…or am I crazy not to if I can?

Real estate friend of mine said his local credit union is offering him a portfolio loan in the mid 3s on his residential property on 30-year fixed loan terms (not just 30-year amortization, loan term of 30-year fixed).  Sounds almost too good to be true to me.  He, his lender, and the properties are all in the same state (Indiana).

I’m wondering if there are any lenders who can do that for me.  I’m in Kentucky and properties are in Tennessee.  5 single family rentals currently on 30-year fixed conventional loans.  I’d be interested in hearing if anyone else is familiar with this.  I’d always thought portfolio loans were either for commercial property or if for residential, had “worse” terms (shorter loan term, higher rate, etc.)

I'm considering investing in a class A multi-family syndication in Tallahassee, Florida.  Obviously the pitch deck is made to promote the area - employment, rent growth, etc.  Wondering if anyone living in / investing in this area has any thoughts on class A multi-family in this space.  

Sponsor is purchasing for about $180K/unit.  Built about 15 years ago.  Plan is mostly interior upgrades to boost rent by targeted $250/month.  Rent comps show similar properties with rent premiums of about $250-$450.  

Project performance projections look mostly strong; wondering if I'm missing anything that's glaringly obvious to those more familiar with the market.