Having to many loans to finance new properties?

Question

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?

Kaleb Henry · Answer

Thanks a ton :)

Heather Easterbrook · Answer

@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.

Anthony Dooley · Answer

@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.

Taylor Chiu · Answer

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...).