My comment about using notes was to sell using notes. How many of these people want to own their own home? From your figures the purchase price is 80% of appraised value. Is this FMV, tax appraisal, or done by a certified appraiser? The average seems to be about 30K as a purchase price. In this area that price would be on the low end of the spectrum.
Something doesn’t sound right on the commercial financing. Did they say they would not let you sell and apply the proceeds to the loan.
If these are low end properties at 80% of value the seller may be getting a good deal. What interest rate do you feel is appropriate at what ITV?
I have recently come across an REI that is retiring. He is making me a great deal if I buy all 21 of his rental properties. The problem I’m having is financing ! I have great credit, good income, etc. All of the mortgage brokers that I use say that they can get me loans on each one seperately, but can you imagine how much closing costs would be on 21 seperate loans !? I would like to bundle them into one loan, but still have the option to sell one or more of the houses over time without having to refinance the entire package.
I just can’t seem to find anyone that will do one big loan with seperate deeds.
I’ve got all my brokers stumped. Any bright ideas?
I agree with all the comments below about the advantages of having separate mortgages.
If you attempt to go for separate mortgages from conventional lenders, you may be faced with underwriting guidelines that restrict the number of loans issued to a single investor. In my area, banks don’t want to make more than four loans to a single individual. Even Countrywide Home Loans has this rule.
This means that you will have to get several lenders involved and all of those loan applications have got to clear. I assume from your post that the seller is making you an all or nothing deal – buy all the properties or none, no partials will be considered.
If this is the case, contact the commercial loan officer at your smaller regional bank or S&L. These institutions often make “portfolio” loans. Ask the loan officer to consider 21 separate notes secured by a blanket mortgage. Also ask for a release clause in the mortgage that will permit you to sell an indiviudal property. If you get a release clause, the lender will want you to pay down the principal balance by some percentage of the total equity being released.
The commercial side may require more money down, than the residential mortgage side of the house. Additionally, they will have shorter amortization periods and a slightly higher interest rate.
Hope this gives you another avenue to explore, though less desirable than 21 separate mortgages.
Alright. You’ve got 21 properties bundled up in one loan package. Times get rough. You can’t make that huge payment anymore. You lose all of your properties.
Now, if you had gotten separate loans, you could possibly choose which properties to save and which ones to give back to the lender.
It simply makes no sense at all to tie up all the properties under one loan.
Re: Here’s a toughy for you ! - Posted by Joe Kaiser
Posted by Joe Kaiser on April 30, 1999 at 20:38:52:
Closing costs in my area are pretty much a percentage of the purchase price. Sure, there is some economy of scale, but it’s not going to be enough to matter. Whether it’s one loan or twenty one, you’d end up with a number that I’m guessing is pretty close to the other.
What I can’t get over is the comment “can you imagine how much closing costs would be on 21 separate loans?” That’s such a strange way to look at things. Closing costs are simply a cost of doing business, nothing more or less.
Finally, a blanket loan on multiple properties with built in deed releases is just way too much trouble. In fact, I’d be willing to pay extra just to have things set up on separate loans!
What makes money on this deal ISN’T going to be what you save on closing costs going in.
Re: Here’s a toughy for you ! - Posted by Joe Kaiser
Posted by Joe Kaiser on April 30, 1999 at 20:38:52:
Closing costs in my area are pretty much a percentage of the purchase price. Sure, there is some economy of scale, but it’s not going to be enough to matter. Whether it’s one loan or twenty one, you’d end up with a number that I’m guessing is pretty close to the other.
What I can’t get over is the comment “can you imagine how much closing costs would be on 21 separate loans?” That’s such a strange way to look at things. Closing costs are simply a cost of doing business, nothing more or less.
Finally, a blanket loan on multiple properties with built in deed releases is just way too much trouble. In fact, I’d be willing to pay extra just to have things set up on separate loans!
What makes money on this deal ISN’T going to be what you save on closing costs going in.
Have you looked at selling 21 separate notes to note buyers? Have you gone to the commercial side of your bank? What total appraised value and ITV are you talking about?
You need to refinance one for some extra cash for that new deal which hits your desk on thursady afternoon. Or you get the opprotunity to trade one of your dog properties to another investor for a better one of his/hers. Or whatever.
Sure I agree with HK, why put all your eggs in one basket? Isn’t one of the rules of this game limited exposure?
Dirk
If I were to go the note buyer route, I would have to pay alot higher interest rate than if I were to go through a bank. As for the commercial side, they told me that I would not be able to sell off the properties seperately if I were to go commercial.
Appraised value is somewhere around 760,000. I am trying to purchase them at 615,000.
These deals are almost always financed by commercial loans through local banks. Properties have to be released as they’re sold, and this is usually negotiated in the loan. I doubt you’ll find a bank to loan 80% on a package like this, so the seller might have to carry back. Also, if you’re new and not experienced in managing multiple properties, a deal like this might not be the best thing for you to start out with.
These deals are almost always financed by commercial loans through local banks. Properties have to be released as they’re sold, and this is usually negotiated in the loan. I doubt you’ll find a bank to loan 80% on a package like this, so the seller might have to carry back. Also, if you’re new and not experienced in managing multiple properties, a deal like this might not be the best thing for you to start out with.