bethel, CT · Member since 2015 · 335 posts · 57 votes
Hi BP, probably a dumb question but was wondering if I have 4 conventional loans already and want to move faster and get 3 commercial loans on 3 different properties giving me a total of 7 loans, will the 3 commercial loans count towards the 10 loans that Freddie mac allows? Or will banks see it as still having 4 mortgages?
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
7y
Commercial loans are done though local and regional banks so they will not affect conventional mortgage loans. You should also talk to some mortgage brokers as there are plenty of lenders that will do multiple single family loans with no limits.
Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
7y
Commercial loans are done though local and regional banks so they will not affect conventional mortgage loans. You should also talk to some mortgage brokers as there are plenty of lenders that will do multiple single family loans with no limits.
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
7y
Will you still keep each property listed individually on your schedule E? If not then you should be good, if you do, then they might push back.
Outside of that, they shouldn't count towards your 10 mortgage limit but doing one commercial loan per property is terribly inefficient and doesn't cover up what you're doing very well.
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
7y
Hi @Ryan Keenan. I was a commercial lender for 25 years, so I hope I can help. FNMA is clear that if they are 1-4 unit properties they will count, but it is a little more gray when it comes to buildings that are more than 4 units. The way I understand it, your personal liability comes into play as well. In come instances, you will get a commercial "non-recourse" loan where you are not personally guarantying the loan. Usually, this is done for much higher dollar amounts (over $2 million in many cases) for later commercial income producing property. It is my understanding that these don't count. That all being said, banks are not fond of lending to residential real estate investors. They have special "Commercial Real Estate" units, or CRE units within the bank that work with larger developers, contractors, and investors. Those loans will not go by FNMA guidelines, but the bank's internal commercial underwriting criteria. I hope that helps a bit.
bethel, CT · Member since 2015 · 335 posts · 57 votes
7y
@Alexander Felice
Thanks for the response , are commercial loans and portfolio loans the same thing higher rates shorter terms?
How do investors go out and buy 10 sfr homes in one year ? What loan products are they using?
I was thinking to buy sfrs with cash and use the brrr method using commercial loans. Once I got to 5 commercial loans then wrap them all into one commercial loan and do it again? What am I missing?
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
7y
commercial loans and portfolio loans are sorta the same thing. It's definitely more of a difference in semantics than anything.
Most investors don't buy 10 in one year, and the ones who do have access to big capital. I don't recommend chasing units for the sake of it.
I use cash to buy BRRR then use regular mortgages. I got to 9 and decided SFR is a lousy way to scale and now I'm only looking at large multifamily. You can buy a bunch and convert to commercial, just make sure to claim them on taxes on Schedule C as a business rather than Schedule E (and talk to a tax pro before doing this). The real answer though is to stop buying SFR completely, it's a bigger hurdle to go around this limitation than it is to buy something much bigger imo
bethel, CT · Member since 2015 · 335 posts · 57 votes
7y
@Doug Smith
Hi Doug, so your saying buying 1 to 4 units with a commercial loan will count towards 10 mortgages. So say I buy my next property a single family with a commercial loan , the banks will count that as number 5 if say i was to try to get a conventional loan for number 6?