Portfolio Lenders

Since my last post, and yes I know it's been a while, the housing bubble has burst and there are a lot of great deals in the market. You have to be very patient as the banks are taking months and months to respond to offers as they are inundated with foreclosures and short sales.

The huge problem now is getting financing as Fannie Mae has lowered their allowed limit of financed investment properties from 10 to only 4. Most banks follow these standards but a few banks called "Portfolio Lenders" don't. Here is the list of bank that I have contacted that would not take my application because I have four or more rental properties:

• Wells Fargo
  
• US Bank
• America First Credit Union
• Washington Mutual
• Zions Bank
  

These banks are able to lend past the Fannie Mae limit of 4:

• Washington Federal Savings (currently requires 25% down)
  
• Countrywide Financial (currently requires 40% down for non Fannie Mae properties)

So now is the time to get private financing from friends, family, business associates, or via business lines of credit. I am always looking for additional sources of funds to invest and can pay 1-2% per month. Not only a great return on your investment, the money is also backed by an asset that I have purchase at way below market value.

Getting a home equity line of credit - or not...

After reading some real estate investing books, I decided to take a bunch of equity out of our investment properties and either use that money for other real estate investments or possibly starting a fixed Universal Life policy as a tax free investment (not necessarily for the death benefit). I've always been skeptical of life insurance policies, so this was not an easy sell, but this book does a great job explaining the advantages.

Anyhow, I've now talked to all of the banks I normally do business with including, Washington Mutual, America First Credit Union, and Aurora Loan Services, and Countrywide. Guess what? You guessed it, the mortgage crisis we are in the middle of has caused banks to go to the other extreme and stop offering Home Equity Line of Credit (HELOC) loans on non-owner occupied properties. It simply does not make sense to me that a bank would be unwilling to loan me money on an investment property if I clearly have tens of thousands of dollars of equity in the home, especially if I'm not even reaching the 80% loan-to-value (LTV) ratio that most banks prefer to stay at or below. I've even heard of some banks lowering the limits on existing HELOC loans without even contacting the homeowner. I guess I may just need to hold out until this crisis is over.