This year I aim at building a portfolio of about 40 residential properties (all 1-4 units) totalling $7.5M in value . I have sufficient capital to make reasonable down payments on all of those properties but I will need them financed. All of these will be long term rentals with good cashflow.
I have excellent credit scores (760+) and very strong additional income from non-RE related income.
I shared my plan with some traditional lenders and I am getting from most of them the story of “FNME puts a limit of 10 loans per borrower”. I know that there are some lenders that are not selling the loan to FNME and therefore can have their own rules.
There’s a combination of lenders that you will need in order to accomplish your goal. Some will allow you to have unlimited loans in all but 4 with them. Others will say unlimited total but restrict the acquisition pace. Most of the brokers on this site should have access to these lenders. You’ll have stated income or no ratio options. Interest only or 40 year terms. These loans are through the normal conventional lenders that offer the Fannie loans mentioned earlier.
Ben is right- you just will have to have someone look at each deal as it comes because there are lenders out there who are more flexible. ONe key is, have you owned investment properties over the past two years? If not, the rapid acquisition rule will bite you with many lenders- they will want to see a 2 year history of managing rental properties before they will allow you to go over a certain number of total properties.
Hawk, Avoiding loan limits is not hard. There are literally hundreds of Sub prime lenders available with a multitude of various programs. Find yourself a good broker and they will take care of the search for you.
Most ALT-A lenders will alllow you to go over the limit. What they will have is limits on how many properties or a max dollar amount they will hold. Aurora and Greenpoint are good examples. Aurora will carry either 10 properties or a million dollars in NOO depending on experience. Although I have never actually checked into this my Greenpoint rep says they will carry 20 NOO. Hope this helps.
I am not a broker, so i do not remember what the product is called, but i know you can merge all your loans together or merge several loans. Only thing is when you sell i think you need to sell all the properties in that loan…
Now the best way to avoid running into this problem is to go out and start a C-Corp or S-Corp and build credit in the corp. Create more than one…Start getting the loans in the corp names and you will never have to worry about running out of room, plus if you make a bad investment, it s the companies credit at risk, not yours.
First, why oh why are you owning all of those propeties in your personal name? You have a target on your forehead for a lawsuit and ALL of your assets are at risk. You need to think “asset protection.” Just one “slip and fall” on that loose board that you neglected to repair and little suzie breaks her neck and your liability insurance won’t touch what Momma’s going to collect in the suit. You could lose everything but your briefs. One in five property owners will be sued this year.
Second, when you figure out that you need asset protection, you can find a lender that will refinance those into your LLC and get them off of your personal credit.
non conforming loans will bypass the limit. btw a good loan officer will shop loans for you and get you different banks for different properties at one time. i am working on a 7 house deal where i got one bank to do 3 another to do 3 and 1 to 1. we work with so many banks that when my investor tells me they want to do 10 or 15 at one time, i just break them up to different banks and shop the best deals. remember n/o/o’s are risky and tend to have a greater risk of default. you will start to notice ltv’s will drop, interest rates will raise, fees will be higher, and so on as the scores drop so i hope you are not planning to manage the payments on your own? open an account and do automatic drafts, this will help to maintain the score so you wont be flagged as such a risk.
Why would you ever use nonConforming lenders for a client such as this? They have outlined the majority of factors but you would still place them with lenders that have higher rates and most likely a prepay???