Top 5 Benefits to a Real Estate Portfolio Loan
After the housing market crashed, leaving hundreds of thousands of distressed homes on the market far below their true value, savvy investors purchased many of these properties in hopes of a quick recovery.
For some, it was a bust.
The necessary appreciation to turn a legitimate return came slower than expected, and these short term buy and sell investments became long term assets.
Upside, downside right?
Unfortunately, when it comes to purchasing income generating properties that are held long term, the conventional mortgage lenders will only allow an individual to acquire a maximum of four to ten mortgages.
This rule keeps growing investors from building their portfolio and caps the income they can generate with it.
Luckily, we have private lending.
Private lending has developed a program that is specifically designed for businesses in this situation, where they need to acquire more properties to increase income but they are capped by conventional lending.
This program is called a Real Estate Investor Portfolio Loan.
The program takes a commercial real estate financing approach to underwriting and as a result, lends primarily upon the value and cash flow of the underlying assets.
There is no review of personal debt to income ratios and the program allows individuals the opportunity to limit their personal liability by converting the ownership to a business entity.
There are many benefits to combining real estate assets into one blanket mortgage, but here are the top 5 benefits to a real estate portfolio loan:
- No Maximum Number of Properties
Fannie Mae and Freddie Mac currently limit the number of investor home loans to four to ten loans. In the real estate portfolio program, there is no limit on the number of loans per borrower. In this loan program, a portfolio of investment real estate is defined as 5 or more units of residential property. The property types included are single family residences, multi-family properties, condos, townhouses, 2-4 unit properties and mixed use residential/commercial properties.
- One Mortgage for ALL Properties
The Investment Portfolio program offers 5 and 10 year mortgages amortized over 30 years, it can refinance the existing portfolio or finance the purchase of existing portfolios of rental investments that are currently leased. This program combines all existing loans into one blanket mortgage covering assets in different states, with one outstanding balance and one payment. This allows borrowers who have assets in multiple areas to utilize one lender for all properties.
- Competitive Interest Rates
The interest rates on this program can beat most conventional mortgage rates. In today’s market, mortgage rates for average borrowers are around 5.75 to 6.25 percent. A conventional mortgage rate is determined by the credibility of the purchaser and increase as the credit scores decrease. In this program, the rates are dependent on the quality of the assets being held in the portfolio, the higher quality of the assets, the lower the rates will be.
- 75% Cash Out
One of the biggest advantages of a portfolio blanket style loan is the fact that a company can extract 75% of the value in the portfolio in cash. This capital can be used to purchase additional properties for the portfolio, to do renovations to existing properties or enter other business ventures. The point is, you can leverage the business’ assets to access capital at 75% LTV.
- Non-Recourse Program
Unlike traditional residential loans that are full recourse to the borrower, loans greater than $3 million under this program offer a non-recourse loan. If the loan amount is below the required $3 million, there are options to purchase the non-recourse for an additional .15 on the 5 year or- .25 percent on the 10 year. The only requirements here are you have to have 10% liquid of the loan value and your net worth must be 50% of the loan value.
This type of loan program can provide real estate investors the opportunity to expand their portfolio, increase the profitability of their current assets and simplify the way they do business. For someone in this industry, a real estate investment portfolio makes perfect sense. If you want to see how this can work for you, I’ve put together a real estate investor portfolio example here.
To speak with someone about your portfolio and how this can help you as a real estate investor, fill out the form below.
Request a contact by emailing Lawrence M Law at…
Lawrence@VantageCreditAlliance.com (Click on the Link)
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