Rental real estate investing often requires nontraditional loans, and today I’m talking to Cary Donham from Capital Concepts. Cary is my most trusted advisor when it comes to mortgages. So, here’s the conundrum: I’ve got 10 houses. What do I do when I want to buy my 11th house? If I go to a bank, they’re going to tell me no. And I don’t want to sell one house to buy another. As we all know, you win faster with more properties. So, what I should do when I want that 11th house?
What is Portfolio Lending?
Portfolio lending goes beyond the limitations of Fannie Mae. Fannie Mae is a conventional loan, and it only allows an investor to finance up to 10 properties in their name. The nice thing about portfolio loans is that you can go beyond the traditional 10, and you can finance them in your company’s name instead of your own name. It’s really a great product. We can do one at a time or we can do multiple properties at once. I just did a 25-property blanket loan for a client, and he financed those with a cash-out. There are many more lending options that what you’ll hear about when you walk into a Bank of America or a Wells Fargo.
Lower Closing Costs
Portfolio loans have another benefit: lower closing costs. The more properties you put into the blanket loan, the lower your closing costs will be. Once you reach a certain fixed cost on one property, the rest would just be percentage based, like the loan origination cost, when you add other properties. So, you may save $1,000 to $1,200 in closing costs per property, starting with that second purchase. The economy of scale really kicks in, and you can save yourself a lot of money.