I was told by one broker that sometimes smaller local area banks
where I am buying the property may still be able to do a home
loan with 20% down even though I now have 7 open mortgages?
In some cases this is true. Sometimes, local banks are more willing to take a risk or be creative if it is a good deal for them. I have worked with local banks that included 2-3 properties on one loan and counted it as such. (1 loan/mortgage)
Go visit with your small local banks. My last duplex purchase 6 months ago I did with no money down because my small local commercial bank put a blanket mortgage on the new property and another rehabbed property. The loan on the other property was paid off by the bank. There was equity there because of the rehab. I was thrilled to not pay a downpayment.
You knew going in what the situation was, so you must have prepared yourself in some way to make up the difference between expenses and income.
Instead of going out and getting a new loan on another property, find one that the owner is willing to finance and make sure you are going to cash flow positively. That will make the burden of the negative cash flow from the duplex more palatable.
I wouldn’t be thinking about selling in two years. I would be thinking about 5 years. Rents are in the process of going up (traditionally they increase at about 4% annually) and it won’t be that long until you break even. In the interim, renters are paying off your mortgage and you are building wealth.
We just closed last Friday on our latest deal. 4 SFHs on a blanket loan w/ a local bank. Loan made to our LLC w/ personal guarantee by our signatures. We put 15% down. They rolled closing costs into the loan and also did in house appraisals based off comps and saved us 4 appraisal fees. Their fees were very low for the loan. We got 6.5% w/ a 5 yr balloon amort over 10 yrs. The banker even told us at the closing table he’d be happy to re-visit the interest rate in a couple months to see if he could lower it for us. I would definitely call around to local small banks in Memphis and see what they can work out for you.
No, not in Memphis. Our deal is in MS. I wasn’t intending to give location specific advice. I just wanted Wallace to know about our experiences w/ a local bank and thought somewhere comparable to our bank would be willing to help him out since he already has other loans on record. Hope I didn’t mislead anyone. Happy New Year everyone!!
Another issue I havent seen mentioned, is mortgage insurance. Its required if the loan to value is over 80%. the private mortgage insurance companies stopped issuing insurance several months ago. this means that you’re looking at 20% down minimum on investor properties with conventional loans.
That’s only if you have less than 4 financed properties.
I have seen people refinance their rental portfolio into a commercial loan in their companies name. This would get the financed properties off their credit report.