Obtaining financing on a fifth investment property

9 Replies

Anyone have thoughts or contacts on obtaining financing past a 4th investment property.

In Lake County IL,  no rich relatives.. LOL.  Currently have 4 rentals cash flowing $300 - $520 a month.  Thanks much Scott

Hey scott I saw no one had replied so thought I would give my two cents. The first thing I would do was try to obtain owner financing if you have already picked out a few properties you are interested in. If that is not an option the next thing I would do would be to find a bank that does portfolio loans that could be an option. The third option I would pursue would be to talk to a bank that has some properties on it's books that your interested in. If you already have a good relationship with the bank they might be willing to hold a loan in house for you. Hope this helped! If you liked leave me a vote :)

Hey Scott,

It's important to understand why you're running into this wall.  Banks sell these loans to Fannie or Freddie.  Both Fannie and Freddie will buy 1-4 mortgages per person.  After that, only Freddie will buy mortgages 5-10, and only with very specific requirements.  As such, most banks do not bother with mortgages 5-10. 

Still, it can be done. But first, you will need to quality for a 5th. This generally means that you have good credit (720), good debt-to-income, 25% down, and enough cash to cover 6 months of your PITI from all of your properties. These are Fannie requirements and I believe they are set-in-stone. They are obviously high standards, and a lot of people don't qualify.

If you do qualify, you should be able to find a lender without much trouble.  Flagstar is a big player that will do mortgages 5-10.  Alternatively, you can work with a mortgage agent who partners with several banks.  Because this person probably works with half-a-dozen banks, they are likely to be able to find one that will do mortgages 5-10.  Just ask your real estate agent or title company for 2-3 names, and you're well on your way.

All of the above is talking about conventional/conforming financing.  If this isn't a fit for you, the next step is to look at creative financing such as seller financing, portfolio loans, selling your firstborn, or Sub-2 deals.  These are far more complicated options, and options that I have never used, but people do use them with good success.  

Originally posted by @Jeremiah B.:

Hey Scott,

It's important to understand why you're running into this wall.  Banks sell these loans to Fannie or Freddie.  Both Fannie and Freddie will buy 1-4 mortgages per person.  After that, only Freddie will buy mortgages 5-10, and only with very specific requirements.  As such, most banks do not bother with mortgages 5-10. 

Still, it can be done. But first, you will need to quality for a 5th. This generally means that you have good credit (720), good debt-to-income, 25% down, and enough cash to cover 6 months of your PITI from all of your properties. These are Fannie requirements and I believe they are set-in-stone. They are obviously high standards, and a lot of people don't qualify.

If you do qualify, you should be able to find a lender without much trouble.  Flagstar is a big player that will do mortgages 5-10.  Alternatively, you can work with a mortgage agent who partners with several banks.  Because this person probably works with half-a-dozen banks, they are likely to be able to find one that will do mortgages 5-10.  Just ask your real estate agent or title company for 2-3 names, and you're well on your way.

All of the above is talking about conventional/conforming financing.  If this isn't a fit for you, the next step is to look at creative financing such as seller financing, portfolio loans, selling your firstborn, or Sub-2 deals.  These are far more complicated options, and options that I have never used, but people do use them with good success.  

Everything on this post was dead on except when you said that only Freddie will buy these loans.  It's actually only Fannie that will buy them and if you qualify LP or Du refi Plus the property limit is unlimited.  

Excellent post though Jeremiah.

Scott,

Hi Scott, have you tried some of your local credit unions? I did not think that I would be financed because I already had a lot of debt, but one of my local credit unions came to my rescue with an establishment of relationship with them for $25.

Keep you momentum, and I aspire to be right on your heels.

Originally posted by @Joseph Pytcher:

Hey!

It would be easier to go with a local credit union. Technically you can have up to 10 financed properties but will need 6 months reserves for EACH property. 

 As long as the bank doesn't have an overlay on the 5-10 financed properties then any banker can do these loans if they are sent to Fannie Mae.

I like community banks for my personal loans since they can usually do unlimited properties at 75-80 LTV if you can document through your lender package that you know what your doing, you can speak lender language debt/equity ratios, debt coverage etc, and you have good references and experience built up.

Albert Bui, Lender in CA (#345453), WA (#345453), TX (#345453), and TN (#345453)
949-514-5106

Hello Scott,

     Ok, Just a crazy idea!!! I have heard of this approach, but not sure there are any banks out there that will still do this. A "Blanket" mortgage. Encumbering multiple properties under one loan. By doing all of your properties together, you only have 1 loan. Sounds simple... I have heard about these loans for years, but never found a bank that is willing to do it. Many have said, it can no longer be done and that may well be true. I haven't looked for this for a couple of years, but with some of the "guideline easing" we have been seeing in recent months... It is possible, this is once again available. When it was available, the big banks wanted no part of it. You would have to limit your search to the community banks. I did hear at one point about 5 years ago there was a bank called Liberty Bank that would do it. I search Liberty Bank and came with so many that I didn't get to contact all of them and came up empty.

      There are definite limitations presented by this kind of action too. For starters, when you try to sell one of the properties and have to negotiate a partial release from the lender. That might be hard to do if you have taken additional debt since the origination. 

     As I said, I have never found a lender that will do this....  But I haven't had the circumstances that would benefit from this approach either.

It might be worth looking for it. Something to think about.

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