In 2005 I had close to 70 single family properties, some were owner financed, some I master lease / optioned, a few I had conventional financing on but most were financed through "Private Money Loans" for terms of around 5 years!
Although the interest rate for private money is higher than conventional financing the tenant is paying the payment and the loans are readily available and do not report on your credit or fall under conventional federal loan guidelines!
As long as you can put an average 25 to 30% down you can get a private money loan and today can find some private money loan lenders who will do a 30 year amortized due in 10 years! Always do an ammortized payment as interest only is good for short term temporary hard money but you want to be paying off your mortgage if your holding long term portfolio properties!
Thanks GR for your insight and congratulations on your success! What was your investment strategy if you were only doing loans for 5 years?
My investment strategy is cashflow and pay off the properties with fixed rates as this will be retirement income.
Here are details on the holdings:
It was extremely difficult to obtain the last (#6) conventional loan via a local credit union. As stated we put 25% down, have perfect credit and 6 months reserves for each property, and a long term successful track record.
All our properties are 30 year fixed except we did 15 year fixed @ 3.75% on the last 2 properties which still provides GREAT cashflow.
I would like to utilize the great traditional rates/terms to the FNMA limit of 10 properties but an al a loss why its lenders are not lending! We had to change lenders on the last deal in the 11th hour as they got cold feet (even though they had FNMA approval they would purchase the loan!)
Any ideas how to secure 4 more FHA loans which will bring us to 10 total?
Whats the next best financing option that will allow for great rates and 15 or 30 year terms?
I have a property management company under a LLC. I wonder if we could obtain a loan under the LLC?[/b]
Normally a private money loan is for a term between 3 and 7 years, some private money lenders now will extend terms out to 10 years! These are normally 30 year fully amortized mortgages which are due in 3 to 7 or 10 years.
FHA does make new loans to investors, but your limited to one at a time! You can also assume an FHA loan or apply for a 203k loan! FHA is used mostly for financing for owner occupied property guaranteed by the Federal Housing Administration, however an investor can have a FHA loan but is limited to one FHA loan at any time. I think your talking about conventional financing as most investment homes fall under this category!
For 4 more conventional finance loans try a mortgage broker with a lot of sources, he should be able to put your application to lenders who will allow you to advance your current position toward meeting that maximum!
Private money loans can be found by googling “Private Money Loans” and if you can make a property pencil out to work with the higher interest rate you can buy homes forever! You just must go back 6 months or so before your loan term is due and refinance it with either the same private money lender or a different private money lender!
You can not get private money for longer than about 10 years maximum right now and I think most only want to do 5 to 7 years maximum! Private money loans can be borrowed in a corporation or LLC if you find the right lender!
As you have experienced, not all lenders participate in FNMA’s 5-10 program. Try shopping around with the larger lenders. They will have more experience with all the paperwork that is required for this financing package.
To purchase and finance a home through Fannie Mae with more than 4 existing financed properties, investors must meet all of the following criteria:
Make a 25 percent downpayment on the property; 30 percent for 2-4 unit
Minimum credit score of 720
No mortgage lates within the last 12 months on any mortgage
No bankruptcies or foreclosures in the last 7 years
2 years of tax returns showing rental income from all rental properties
6 months of PITI reserves on each of the financed properties
and to reduce fraud, you must sign a 4506-T – a form giving lenders permission to verify your submitted-with-the-loan tax returns against the official, IRS-filed version of the same.
FYI: For refinances, loan-to-value is capped at 70% for all property types.