We’re putting an offer in on a single family rental today, and now that the ball is rolling, we found out more that we don’t know and need help. (Mark Wagner, help!)
Just found out through the lender that the most mortgages we can have personally at any given time is 4- how do you buy more than 4 properties? Pay one off and buy another?
There’s got to be another way, I’m sure there are companies out there that buy tons of properties. Should we buy the properties under our LLC, qualifying for the loan personally in the meantime? (LLC on deed, name on loan)
Or buy under our name, loan in our name, and deed property to LLC upon closing? (name on loan, LLC on deed after closing)
Do we buy the max 4 properties under our own name, carry an umbrella liability policy, and then when the lender says no mas, figure out another way?
My assumption was if we start with these properties under the LLC, by the time we need to exceed the 4 mortgages, we would be able to qualify based on rental income in a couple years, through just the LLC and break through that number. Wrong assumption? Those that own many properties, how do you do it?
We have a brand new LLC set up in Texas. Our plan is to purchase two rental properties a year, in Texas most likely. Not sure yet on self managing vs property management.
Thanks so much REI Club! Been a huge lurker here for years!
You may have misunderstood the lender or the lender misstated their policy. Most conventional loan lenders will not give a borrower more than four loans. You can have up to ten financed properties, but most lenders will not finance more than four of them, nor will they finance your eleventh investment property. If you already have four loans from one lender, then go to another.
If you already have ten financed properties, then go to a commercial lender for your next investment property loan.
Yep, I must have misunderstood the lender. My understanding was that any one individual could only have 4 loans…and I couldn’t figure out how people do it. But where there’s a will, there’s a way! I hope to have the problem of too many properties soon!
While the rule is usually stated as the number of loans, in actual practice, the lender looks at the number of financed properties. One blanket mortgage covering four properties is counted as four financed properties and equaled to four loans.
Wells Fargo will loan on more then four on a case by case basis. Fannie Mae is Max 10 loans but most banks have a 4 property overlay. You could also get a commercial portfolio loan. Definitely hire a Property Manager if you have not managed property before.
I talk about investor grade professionals a lot. Mortgage brokers that deal with real estate investors know how to do whatever you’re trying to do. We do it all the time so it can be done. Get an investor grade mortgage broker.
Thanks for the responses. We’re only at two now, but my parents didn’t structure their business right from the beginning, and I want to make sure I’m doing the right things at the right times and stages of the game.
BlueMoon, could you PM me info on the lender (or lenders) that you use? That would be really helpful! We’re hooked up with JetLending as a hard money lender here, and will be researching some more. (We’re the ones that live right in your neck of the woods.)
Appreciate this forum and site (and all the insight on this site) so so much
I don’t know where you are on your lifetime wealth plan timeline, but this might help. I begged, borrowed, and used credit cards until I had equity spread across properties. Then I consolidated that equity into one property, land with standing timber, that was debt-free. I used that property for a line-of-credit loan. From that point, when I needed money to get into an investment, I could just write a check for up to $100,000 and go. When I got the investment buttoned up and cash-flowing, it was easy to finance and pay back the draw on the line of credit, and do it again. I never had to ask somebody else if I could use their money, and bow and scrape and incur the expense. I highly recommend this as an operating strategy.
I thought I had already replied but I must have typed it and gotten distracted. I already talked about this strategy to my husband over the last few days and we’re going to incorporate it into our plan.
We have two houses right now with conventional owner occupant financing. We have the cash, but don’t want to put 15-25% down on an investment property so next step is hard money or private lending. We’ll do what we can with SDIRAs too.
But this strategy could launch us, if we play our cards right, and are able to pay off one property quickly.
Does it matter what kind of property?
Is one kind better than another? Like land over a house?
Or is equity in a SF home just fine to put a line of credit against?
Sorry for the newbie questions, my guess is SF line of equity will work fine, wanting to find any roadblocks before we put all our eggs in that basket for financing.
The key to a loan like this is to look at it from the perspective of the bank loan officer.
He has 2 concerns:
1.) What questions and objections do I face when I take this application to the Loan Committee?
2.) Will this damage my prospects/evaluation if the bank has to take this property?
Remember, it’s not his money.
He’s only worried about his career.
I think that land is better than a house because:
1.) House values are very much a matter of opinion; there are dozens of variables; values can fall severely with economic conditions; they are a major headache if the bank has to take them.
2.) Land values will be more standard, a certain dollar amount per acre in the region, depending on the location and state of development; there is virtually no holding cost for land other than property taxes, and those can be reduced drastically in Texas with a Timber of Ag Exemption, so there is no major headache for the bank if they have to take it; land prices can actually go up in a bad economy because investors look for a safe place for their funds.
I’ve done this with 40- to 80-acre tracts of land with standing timber, as well as with SFRs.
I much preferred the land deals, and so did the bank. They were simpler, safer, quicker and cheaper.
Let’s face it, you are going to have your equity somewhere.
Why not consolidate it in a tract of land, set up a line of credit loan, and be able to write a check on your equity anytime you want without so much as a phone call to anyone?
I know of some areas seeing development and commercial plots, maybe I can find a spot just outside of it. I’d love to have a spot with a sprinkle of speculation on future development and appreciation, vs just some land.
Closed on house #2 yesterday! So we’re not quite there yet but I really like the line of credit as a strategy for year or years to come.
Hey Michael… are you still on this forum? I’d like to do a 1031 exchange with my current portfolio and your method of buying land is genius - but what type of personal income verification will the bank require from the borrower or will it be primarily asset-based? I took a quick look at your website and if 1031 exchange is a service you provide, I would love to chat. I live in NJ. Thanks