It’s no secret that affluent clients love investing in real estate. But providing financing on residential rental properties becomes difficult when multiple properties are involved.
Traditional lenders have options available for up to a certain # of investment properties, but they typically will max out at “5 – 7 doors”. So how do you assist luxury homeowners that have more than 10 rental properties?
Believe it or not, it’s not difficult. The Luxury Home Mortgage Advisor course discusses how to build your own network of institutional lenders that will lend on 10+ rental properties. But these lenders won’t waste their time looking at deals unless they are packaged properly.
I’m working with a mortgage broker whose client owns a holding company with 22+ residential properties, all currently financed with various private lenders. You can imagine the accounting headache of keeping mortgage payments in line with the rental income.
The client approached the broker with one simple ask: to consolidate all existing mortgage loans into 1 mortgage, under 1 lender. The total amount of debt was $4.5 million dollars. Now, there are many private lenders that will jump at this opportunity, however, we thought it would be best to package the deal and shop it to A lenders first.
You’ll notice that the mortgage broker channel does not have many options to do this. So, we structured it like a commercial deal – lender will meet directly with the client, broker will charge the client 1 – 1.50% commission.
Whether the deal gets approved as an A deal (with a hyper-competitive interest rate) or we have to place him with a private lender (we have lenders that will go up to $30M on residential) will depend on his income. Here’s a checklist of all that is required to “shop” this deal around:
- T2 General for Holding Company,
- 2-years Financial Statements for Holding Company,
- T1 General & NOA for client for 2-years
Besides the above, the broker needs to provide as much detail as possible about the properties including the following:
- Type of property,
- Appx. value,
- Current mortgage balance
- Interest rate and monthly payment
- Rental Income,
- Calculate LTV,
- Provide comparable sales & DOM (Days on market)
Why are we calculating LTV, providing comparable sales and days on market for comps? We are doing our homework from a risk analysis perspective and packaging up the file as neatly as possible. By doing this, you are showing the lender a) you know your stuff and b) you are making it easier from a risk perspective to get them to approve your deal and provide your client with a proposal.
The Luxury Home Mortgage Advisor course will be holding 1-day workshops in Toronto and Vancouver this September!
Stay tuned for an announcement on dates/location. If you prefer to take the course online, feel free to enroll here: https://www.luxuryhomemortgageadvisor.com/membership-signup/