Rental #10 was purchased

53 Replies

Yesterday.

here are the details:

2 months ago the asking was 89.9k. I offered 75. they came back at 89. I laughed. they came down to 83. I came up to 76.5. They came down to 78. we were $1,500 apart. We had no deal.

3 weeks later price was lowered to 78. I offered 70. after six back and forth, i purchased the house for 72k - 4.5k under what i would have paid the first time.

anyway

PP - 72k
taxes - ~2200
interest - 4.7
insurance - 762

total monthly payment ~ 535
potential rent - $1075-1150
potential profit - $540-$615

30 year fixed, 25% down

expected repairs $15-22k, 1.5 months.

meanwhile, #11 is under contract. but more on that when i close on it.

@Mark Ferguson , similar to your strategy. just a few tweaks to it.

Promotion
Roofstock
Buy & sell single-family rentals online
Radically accessible real estate investing
Get access to exclusive property listings, proprietary data, and support to build your portfolio.
Learn More

@George P. congrats to you good sir! 25% down, is it own in your owned name? If so, how many loans do you have in your own name? Might be hitting that Fannie Mae limit. I want to see you get to 50+!!

Keep us all informed how it goes.

@Ryan Steele , always meant to tell you i like your posts!

with my personal house, we have 11. some are in both names (wife and my), some are in hers. some are in my name. one was cash. so i can do just one more with Flagstar bank, they do 4-10.

I had a guy (from cali) tell me he can do up to 20 if they are homepath homes. i had one guy tell me he can do 10 in wifes name and 10 in my name. i'd have to quit my job if i hit 50.

i have a professional day job during the day. i update them nicely upfront so i dont get silly calls that there are leaks under the sink.

@George P. thanks for the compliment. If you do this as a business, why do it in your own name? Time to change that mindset. You can still do the rest the same way, but you are hitting limitations, and you need to learn how to do COMMERCIAL loans. You may pay a tad more, but isn't it worth it for the knowledge that the liability protection is there for you?

never done a commercial, but i heard it takes longer, need 40% down and higher apr. that was the reasoning behind it.

we quit claim them immediately after purchase in the llc name.

40% down? pssh...noooo. Shop around at local small banks. My LLC is working on it's 3rd mortgage with our local bank. We need 25% down...and down payments are not required to be vested.

Originally posted by @Ryan Steele:
If so, how many loans do you have in your own name? Might be hitting that Fannie Mae limit. I want to see you get to 50+!!

Keep us all informed how it goes.

What's the rule about loan limits. My banker told me there are no limits with me cuz I have a commercial loan????

@Martin Zawarski It probably varies bank to bank. Mine are commercial loans too and my bank basically said as long as we're performing well, they'll most likely just keep loaning.

The majority of "residential" lenders will sell their loans to Fannie Mae or Freddie Mac. Those two will not buy more than 10 loans per individual. So you are capped out. Now some local banks may "Portfolio" loans (meaning they keep them in house).

Commercial loans are backed by private funds, groups, VCs or kept on the books by larger institutions even smaller ones. This means they do not have to play by the Freddie and Fannie rules.

With that being said, if you have a loan in your personal name, it is recorded against the deed/title. This means, if you get a loan in your personal name, even if you the title is in a trust, or LLC, you are now going to named in any lawsuit should a tenant, their friends, etc get hurt etc. on the property.

You should also have insurance, but a properly filed, kept and operated LLC will add to that level of liability protection.

Did that accurately explain it @Martin Zawarski ?

In other words, I will say this yet again. This is a BUSINESS. Treat it as such. Do not endanger your personal assets, and file your entity as you would if you were to start a restaurant, an auto shop, a car dealer, etc.

Stop treating REI as a hobby. Deal with BUSINESS Bankers, as you are a Business person.

Promotion
Vacasa
Vacation Rental Property Management
We do the work. You get the ROI.
We do it all for your vacation rental. All—marketing, pricing, guest requests, housekeeping & more.
Free income estimate

One more thing, is that Fannie and Freddie have changed that limit several times in the last few years. Of course, in 2013, Fannie announced record profits (remember our tax dollars bailed them out).

But at one point they lowered it to 4, then it was 8, now 10. So if you are on 9 and hoping for more, then Fannie says, oops, back to 8. What will you do?

And @Martin Zawarski I know you knew that answer and were just hoping we would explain it for the good of others, right?

Originally posted by @Ryan Steele:

But at one point they lowered it to 4, then it was 8, now 10. So if you are on 9 and hoping for more, then Fannie says, oops, back to 8. What will you do?

Use your spouse and her income to buy 10 more. Or pay off all your mortgages with a portfolio loan. Blackrock just got into that game. Or pay off your smallest mortgage either with cash or maybe a HELOC on your primary residence and get a new one for property #11.

There have been lots of discussions on here about this. Search around.

@Robert Steele Suggesting people use their spouse isn't the smartest thing either. Guess people don't think that Divorce happens. Then you are in a world of pain.

Seriously, just set up your investing as a business and treat it as such.

@George P. funny man.

Time for you to start realizing this is a business and deal with business bankers/lenders. Are you ready to go from playing pick-up games to getting at least into the minor leagues? That is the analogy I use for those that continue to do residential financing.

You are getting the bug and realizing you can't do it the same way. Get your entities filed, be sure to keep your operating agreements, annual reports and meeting minutes. Separate bank accounts, etc (Do not co-mingle funds), keep it all separate and treat it as a business. If both you and your wife are members of the LLC, it makes it more as a company that a single member LLC.

File separate taxes for it. This keeps another layer of liability insulation. And it allows you to be treated as a business by lenders. Get the loan in the business name, build the business credit profile, etc.

ryan, in other words you are suggesting to threat it as a corporation and file separate tax returns. Not an llc, which is tied back to my SSN.

Whats the easiest way to find local banks that do commercial loans? Other than cold calling?

my loans are all considered commercial loans and they are kept in house. I mention the limit to my banker years ago when I first heard about it and he said don't worry it doesn't apply to you . It seems most rules don't apply to me. But my banker never explained why to me.

Another point I hear is "get a good attorney". I asked my attorney if he should be consulted about what I am doing. He said it seems I'm doing fine without him.

@George P. an LLC can be treated either way, a multiple member LLC is automatically treated as a company. If you treat it as a company you are better off. LLC is the way to go. If you pass it through to your own taxes you lose the point of the LLC to begin with.

Anyway, set it up, be a business, and deal with commercial lenders. You will be surprised how many loans and how many properties you can do then.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you