Hard Money Loans: What Every Flipper Needs to Know
Hard money lending is the engine that powers most fix-and-flip operations. Understand the terms, costs, and how to qualify.
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Financing6 min read
Portfolio Loans: When Conventional Financing Isn't Enough
Portfolio loans are held by the originating lender rather than sold to Fannie or Freddie. Here's when they make sense.
Most conventional mortgages are sold to Fannie Mae or Freddie Mac after origination. Those agencies dictate underwriting guidelines that all conforming loans must meet, strict income documentation, debt-to-income limits, financed property limits, and more. Portfolio loans are loans that lenders keep on their own books rather than selling them to the GSEs, freeing them from conforming guidelines.
For real estate investors, portfolio loans unlock financing that conventional channels cannot provide. Common use cases include investors with more than 10 financed properties (conventional cap), investors with non-traditional income (self-employment, retirement accounts, multiple entities), properties that don't meet conventional guidelines (mixed-use, rural, unique), and borrowers with recent credit events that haven't fully aged out of conventional scoring windows.
Typical portfolio loan terms vary by lender but often include rates of 7–10% (higher than conventional investment loans by 100–200 basis points), 25–30% down payments, amortization periods of 20–30 years, and fixed or variable rates. Some portfolio lenders also offer commercial-style balloon notes (5- or 7-year balloons with 25-year amortization).
The advantage is flexibility. Portfolio lenders can consider the full picture of your financial situation, ignore property count limits, accept unique properties, and customize terms to fit the deal. Approval is often faster than conventional financing because there's no external underwriting layer.
The disadvantages are cost and scale. Portfolio lenders are typically smaller community banks and credit unions with limited loan capacity. If you plan to finance 20 properties in the next two years, one portfolio lender may not be able to support all of it. Building relationships with multiple portfolio lenders spreads risk and expands capacity.
To identify portfolio lenders in your market, start with local community banks and credit unions. Ask directly: "Do you hold any of your investor loans in your own portfolio, or do you sell them all to Fannie and Freddie?" Lenders who hold portfolio are candid about it, and a single relationship with one good portfolio lender can unlock dozens of deals.
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