Hi Susan,

Thank you very much for the great information on portfolio loans. I can learn a lot from you. I meet lots of investors but none of them talk about portfolio loans. If you don’t mind, I have some questions.

Do I need good FICO score to qualify for this loan?
Do I need to have reserve funds?
Do I need to have 10, 20, 30 percent down?
Do they need collateral?
How long should LLC or Corporation need to be seasoned?

Thanks, Alvin

Hi Alvin, Thanks for the note.  No one talks much about portfolio loans because no one really understands them.  Except me. 

Portfolio lenders will look at the underlying collateral which is the residential or commercial property you want to finance to answer most of these questions.  Unlike conventional lenders that have to follow Fannie Mae/Freddie Mac rules, portfolio lenders have no set rules to follow so all the portfolio lenders will have varying underwriting criteria.

I’d say to be in good shape for financing a residential investment property with a portfolio lender you should have a credit score of at least 640. Your LLC does NOT have to be seasoned at all and the reserve requirement is no where near the 6 months’ PITI per financed property that conventional lenders are requiring.  Start contacting some portfolio lenders and see for yourself. If you need more help, check out my Portfolio Loan Blueprint course.— Susan

Yes, I read it for fun and no I am NOT a geek no matter what my friends say.

As a commercial investor, I want to know what somebody smart thinks is going to happen. And Greenlee is smart.  Here’s what he had to say:

U.S. banks are at risk of sizable new loan losses, particularly on commercial property, and some banks may not have sufficient capital to fully cushion against setbacks.

Some large regional and community banks that have built up unusually high concentrations in commercial real estate loans will be “particularly affected” by conditions in those markets.

Hmmm… commercial foreclosures are coming. And they’re going to come from portfolio lenders. Me likey.

This means that we’ll be able to pick up all sorts of income producing properties at deep discounts. Bulk REO deals, short sales and note buying are all strategies we can now utilize in a may-jah way in commercial.

And here’s the deal. The reason why these properties are headed to foreclosure isn’t because they aren’t cash flowing.

They are.

It’s because the market has declined in certain asset classes such as multifamily, office, retail and warehouse and the CAP rates that they were initially valued with haven’t held. So, the NOI is just fine. The CAP rates have just tanked.

The CAP rate looks a whole lot better when you can scoop up the property for .60 on the dollar.

I’ve been a little burned out on real estate investing this year. It’s just not been as fun as some of my other ventures. But I think it’s about to get a lot more fun. I’m getting excited thinking about the possibilities in distressed commercial real estate.

The full text of Greenlee’s testimony is here.

Lately, as I release more and more training courses, the question I get over and over again is some variation of, “If this is so great, why don’t you just do it yourself instead of selling it?”

It’s a fair question – in a passive aggressive way – so it deserves to be answered. The bottom line is I like to teach what I know and learn. I give away a lot of valuable info for free but the stuff I sell has tremendous value and is worth something.  And I think you’ll notice that my video courses all have $97 price points not $1997.

Which brings me to another issue. Lending.

Here’s a $64,000 I got from a reader today. If you can stay awake during the first part, you’ll get to it… eventually.

Hello Susan,

The reason why Fannie Mae does not do loans for LLCs is because of their charter. Fannie Mae was started during the LAST “depression” to provide liquidity in the US residential housing market for banks who’s deposits were being “run on” by depositors. Because people were withdrawing their funds from banks, the banks had no money to lend to people who wanted to buy or refinance homes. Their charter evolved to help promote home ownership by providing banks and loan officers with streamlined, standardized, and automated underwriting by using their software. So as long as banks and loan officers used their software to qualify borrowers, they knew that Fannie Mae (and similarly Freddie Mac) would by their loans from them at a discount ; thereby continuing to provide liquidity and stability to the US housing market.

So they were never setup to provide mortgage loans for investors. However, home owners do move from one house to another over time, and it’s not always the best time to sell if you need to move. So Fannie Mae allowed home owners to have up to 10 mortgages that they owned. After that, they figured that you must be buying houses as a business. That limit has subsequently been reduced to 4 in the last 2 years to reduce their risk.

So the real questions (in particular for buy and hold investors with more than 4 properties) are:  1) Who are the lenders who are still lending on residential real estate investment properties in the United States (portfolio, LLC, or whatever) and 2) what are their underwriting criteria? The only other alternative is to raise private money.

I haven’t had time to read through all of your emails so far to see exactly what you are offering. But I was thinking…

If you actually know some banks or lending institutions who are still lending to profitable investors with seasoned businesses and good credit scores, why don’t you just broker the deals??? That way, you would get paid based on deals that you actually do and the knowledge you have. Is that what you are doing? If not, why not? — Darren Solomon

And here’s my succinct answer:

Thanks for the history lesson.

The banks that are lending are portfolio lenders and they don’t have wholesale programs. If I broker, the borrower gets charged double origination. Seems like a rip off, no?

Yes, it’s true folks. I don’t want you to get ripped off. The nerve of me!

If you’re like Darrin and have no time to read my emails but still want to get loans from lenders that don’t have to follow Fannie/Freddie rules, check out portfolio lenders.

I just got off the phone with a guy we’ll call Bavi. He’s requested a refund for the Portfolio Loan Blueprint because “it looks like it requires some work.”

I said, “So, you’re interested in investing in real estate but you don’t want to do any work?” and he said, “YES!”

Wow.

You know, I could deliver a lecture here about how anything that produces income requires some work but I’ll save it. I think the actual investors that read this will understand. The opportunity seekers won’t.

I personally am happy that Bavi won’t be contacting portfolio lenders and making money from those calls like I taught in the Bulk REO Secrets virtual class on March 18th. That means there’s more deals for us who aren’t too lazy to pick up a phone and make some money.

Good luck to you Bavi! Try not to get a paper cut from that time card I’m sure you punch every day.