I was talking to a freind about how I wanted to start investing in rental properties, his big concern was wondering how one would be able to get a loan on your second or third house with having several loans already? I told him I didn’t think this would be an issue that could’nt be over come clearly people do it! However I didn’t have a defenitive answer. How do you obtain funding after your first or second property? How long can you go on conventional loans? Do you have to keep refinancing the properties?
Hey @Kaleb Henry , so you are right, you can actually get up to 10 conventional loans through Freddie / Fannie. After the first several, the qualification process can tighten up a bit. At some point you'll have to show 6 mo reserves for each property you own.
And once you hit 10, then you'll have to find other ways to fund (payoff one mortgage to free it up, get a commercial loan, private money, etc...).
@Kaleb Henry it isn't the number of loans that would be a concern for a lender. They look at your debt to income ratio, credit score, and the deal you are trying to buy. If a bank turns you down for a new loan, it is a pretty good indicator that you are getting in over your head. Take this as a sign to pay down some debt and / or increase your income. I prefer to purchase multiple properties using one commercial loan.
@Kaleb Henry The maximum number of conventional loans is 10. Keep in mind that this includes any property loan that you are attached to, including owner-occupied. Typically, 75% of rental income counts towards DTI. Once you've maxed out, or it becomes too difficult to qualify with a bank, you can refinance the properties with a residential portfolio loan or use a non-conventional lender.
Thanks a ton :)