Investor Review: LOAN CONSOLIDATION
SPONSORED CONTENT The Smart Investor’s Guide to Rental Portfolio Loans CONSOLIDATING PROPERTIES INTO ONE PORTFOLIO LOAN CAN UNLOCK SAVINGS AND SIMPLIFY YOUR STRATEGY.
KIAVI
W hen exploring financing options for rental properties, real estate investors often weigh the benefits of individual loans versus portfolio loans. Rental portfolio loans allow you to streamline all your rental investments into one neat package by combining your properties under one loan. This consolidation can offer better terms, including lower interest rates and reduced fees, making them advantageous for scaling up. By understanding how these loans are structured and priced, you’ll know how to make informed decisions. This means analyzing not just the surface numbers but also considering how the loan’s terms (i.e., prepayment penalties, liquidity requirements, underwriting requirements, and other loan covenants) can affect your long-term profitability.
PORTFOLIO LOAN (FOR A 10-PROPERTY LOAN) Processing Fee: $6,000 (estimated) Origination Fee: 1.000% By choosing the portfolio loan, Ethan sees a reduction in upfront fees, making it a more cost-effective option. INTEREST RATE SAVINGS Ethan stands to gain significantly from a portfolio loan due to its lower interest rates compared to single- asset DSCR rental financing. Even a modest 0.25% reduction could save him more than $10,000 in five years and $20,000 in 10 years, underscoring the substantial long-term financial advantages of opting for this type of loan. DETAILED FINANCIAL BREAKDOWN For both the individual and portfolio loans, Ethan’s loan amount is
Let’s look at rental portfolio loans and break down the math behind them using a real-world example so you see the benefits. ETHAN’S SCENARIO: INDIVIDUAL LOANS VS. PORTFOLIO LOAN Consider the following example to understand the math behind rental portfolio loans. Remember, this is an illustration, and your actual terms may vary. Ethan owns 10 rental properties. He’s considering a rental portfolio loan to consolidate his investments. Here’s a comparison of his options: INDIVIDUAL LOANS Processing Fee: $999 per property Origination Fee: 1.5% or $2,000, whichever is greater
38 | think realty magazine :: september - october 2024
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