Bank Financing

[Hugh0997]

About how many properties can you own before it becomes difficult to obtain bank financing?  My brother has a few properties (all have positive cash flow) and he says it gets more difficult.  What are your thoughts?  I would imagine it should get easier if you are showing profits on your business to find bank investing but dont know if that is really the case.  Thanks.

[gsuidiot]

When a bank looks at your rental income they accept 70% of the rents as usuable income.  If your brother's rents are only covering the MTI then every house is slowly eating his debt ratio.  You should plan on buying so your rents are high enough to keep your ratio acceptable for future purchases.  I learned this when trying to purchase a REO property.  Can he re-fi a few to get the ratio down?

[Hugh0997]

well he has refinanced one and the other he just purchased.  He is in a good position, properties have a positive cash flow and he lives in a small house in back of property for free.  He just mentioned that moving forward banks want 20% down and the rates are higher.  he is doing ok but he may has topped out for now.  I thought you could just keep taking out the equity in 1 and using it for a down on the next and keep that cycle going.  Guess now, damn you Kiyosaki! lol

[REI4ROI]

FYI---75% of rental income can be used towards income qualification...

When a bank looks at your rental income they accept 70% of the rents as usuable income.  If your brother's rents are only covering the MTI then every house is slowly eating his debt ratio.  You should plan on buying so your rents are high enough to keep your ratio acceptable for future purchases.  I learned this when trying to purchase a REO property.  Can he re-fi a few to get the ratio down?

[gsuidiot]

hmm, that stinks.  I'd talk to another bank...someone will give him the money if the deal makes sense.  The market has also changed and it's tougher to get financed without something down...timing maybe skewing his perception.

EZ, thank you for the clarification...

Good luck to you both.

G

[REI4ROI]

10 properties mortgaged is the new benchmark for most---anything above this will reduce your brother's potential LTV allowance from 85-90 (depending on how he is willing to document his income/assets, etc.) to about 70 LTV...

Regards,

Scott Miller

About how many properties can you own before it becomes difficult to obtain bank financing?  My brother has a few properties (all have positive cash flow) and he says it gets more difficult.  What are your thoughts?  I would imagine it should get easier if you are showing profits on your business to find bank investing but dont know if that is really the case.  Thanks.

[Hugh0997]

sounds like there is allot more to look into.  He may have low cash on hand from the last buy so maybe he just is taking some time off.  He likes the multi fams so unless he finds a good deal he may need to wait.  Thats my exact issue at this poing.  My father buys small condos and my brother buys multi units.  Multi seems to have better cash flow but tie up allot of your cash via down pmts.  Small condos require allot less down and seem to be less risk if need to sell.  Really just trying to figure out the best first property to buy.  Sounds stupid but really want a good foundation.

[gsuidiot]

If you don't own a house now, look for a double and live in half.  If you own something, look at the numbers and not the property type.  A condo making me $500 is better than a duplex making me $200.

Currently, I'm looking for another place.  I've got my eye on SFH, Doubles, 3 units, and 4 units.  It all depends on profit/unit.

[Hugh0997]

im just renting right now.  Have my credit and savings back online so excited to learn the business and take part.  Thats what I mean about my first property.  Deciding between a 3 fam, duplex, or keep renting and pick up a property for investment only.  Any thoughts on what may be the best way to start out?  Thanks for any help you can all offer.  This site has been much better then the 25 plus books I have read.  By the way on that topic "Flip" has been the best purchase I have made so far, great suggestion!!!

[gsuidiot]

If you're handy, buy as many units (up to 4) that you can afford.  Live in one unit.  Never rent and own an investment...crazy thinking.

I picked up a duplex but if I were to do it over again I would have bought a four unit. 

Good Luck.

[Hugh0997]

very nice thanks!!  Im telling you I have really been throwing it around.  My brother also bought a duplex first and lived in it.  His next was a great 3 family with a small house in the back that needed fixing up.  4 fam units are rare in my area but there are allot of 3's.  Some say they dont want to live with tenants but I dont think I would mind to start out.  I am good with fixing things up, I have been helping my brother and father do there units for years.  Lots of favors to cash in on lol.  Now that being said, regarding  multi fams do you still try and use the 2% rule or just watch the cash flow?  Rents for 3 fam units in my target area go for 750-800 no utilities.  That would mean I need to be looing for a property for no more then 120K  Yikes 

[propertymanager]

I hear this all the time - that you are limited to some number of rentals.  I have not found that to be the case.  I will be closing on another 4 buildings with 11 units in the next few days (the building I thought was a 6 unit is actually a 7 unit).  I have several dozen rentals and have had NO problem getting the money.  I was a little concerned about the latest deal, with all the hype about sub-prime and tightened loan standards, but those concerns were unfounded.

They key is to use small local banks that keep their loans in their own portfolio.   Obviously, you need excellent credit and having a track record with the bank is also important.

Mike

[stevie-o]

They key is to use small local banks that keep their loans in their own portfolio.   Obviously, you need excellent credit and having a track record with the bank is also important.

Mike

I can attest to this. Having been a mortgage broker, most lenders we used had issues with multiple properties. Fannie Mae and Freddie Mac say 10 is the max financed, and then alot of the subprime or other lenders have rules too....finding a local bank who will keep them in their portfolio is big.

[Hugh0997]

gsuidiot when you said "Never rent and own an investment...crazy thinking."
Did you mean dont buy a multi family and live in it??  So should I concentrate on sfh?  Im sorry I think I read your reply wrong.  Would you suggest buying a 2-4 family home, living in it and renting out the other units or is that bad?  Thanks.

[gsuidiot]

Hugh, I was stating you should not pay someone rent and then go out and purchase a rental property.  Personal financial growth requires eliminating as many liabilities (rent) in your life as possible and adding assets (positive cash flowing property).

If you want a new car...look for a property to pay the bill.  If you want to live for free...look for a property to support you, etc.