Where to get financing for multiple properties

Question

First I would like to thank everyone for all of the great information they have put on this website.  It is by far the best one I have visited.  I also apologize if this is not the right thread for this question.

I'll run down my plan to help you understand exactly what I am looking for as far as financing goes.  Myself and two others are looking into buying rental properties.  We have found quite a few in the 20k to 35k price range that are bring in anywhere from 250-350 net each month and most have leases in place.  The plan is to buy as many of these units as possible (ideally around 100 over the next two years.)  We have experience in owning rental properties, but nothing to this magnitude so we are looking to build up to that number and not purchase all at once.  This is where the problem comes in.  We have dealt with Countrywide (the reason for Country wide is that we get 10% down and 6.85% on a 30yr) in the past but they informed me that their policy is 4 loans per person bottom-line.  Is there a way to get financing similar to this for the number of properties we are trying to get?  I am not sure if we could get the 4 from Countrywide, another 4 from BofA, another 4 from Wells Fargo etc. or if we need to start a LLC and find a different route for financing.  Any suggestion would be greatly appreciated!

Scott R. · Answer

the small local bank where im located at the lady said you can have up to 10 home loans.. there capped at 10.. problem being if you use smaller banks/cu's then they will prob have to be where the property is located, if its a small credit union in florida theyre not gonna want a rental prop in texas.. I know the bank im dealing with (small local bank) will only loan out within like 100 mile radius.
 -Scott

Lynn Z · Answer

A family member has over 10 mortgages and the commercial short term balloons have always shown up on her credit report.  It must depend on how the bank reports it.  Never been discussed that I know of.

They really don't care about the number of mortgages they have.  Thus far.
I think it's important to obtain the loan, go ahead and finish out the project and get long term financing if you can.  Move on to the next one.  They can feel a little overwhelmed if there's too much delay and too many requests collaterally.  Don't forget that if you cross collateralize and decide later on to sell that property -- the bank has to tell you what they'll take to release their interest.   Talk to them before you finalize a contract for sale.

We sold a lot attached to a house so they wanted $5000 to reduce the mortgage they held on the house.  Same situation, we asked to be released with no reduction in the house mortgage and he agreed.   That was nice.

Ben Carmona · Answer

Fannie, who establishes the guidelines for conventional financing, allows a borrower to have to 10 financed properties.  Many lenders will cap themselves at about 4 though.  If there are mulitple borrowers on the application, then all of the properties have to be totaled up.

Technically you would need to use a variety of lenders to acquire up to the first 10.  After that you'd need to use either portfolio lenders or commercial loans.

Portfolio loans are available through several of the same lenders who make conventional loans.  Instead of selling of the loans on the secondary market to Fannie Mae, the loans are either sold to large Wall Street investors or held/serviced direclty be the lender.  The guidelines for each lender who offers these may be a little different.  Right now there is a huge shortage on lenders that allow for over 10 properties.  Only a couple allow for over 10 and have loans like stated income or no ratio.  Several others have similar loans but are full doc only.

Commercial lenders typically do not make loans on residential 1-4 unit investments.  You'd either need a brick and mortar bank local to where the property is located or a national commercial lender that makes exceptions to residential.  I know of one lender that does a refi only loan up to about 75% with a minimum amount of $50k.  Keep in mind though that commercial loans will be higher terms, shorter amort., and balloon notes.  However, these are made in the name of a business and will stay off your personal credit.   Another method would be to get blanket loans which wrap properties up together under 1 loan.  Several months ago there was a waive of these being offered but the lenders I know of temporarily stopped doing them.

Lynn Z · Answer

I believe you can have those 10 mortgages plus your home.  Also, a mortgage broker once asked if those 10 mortgages were all in the person's name or LLC  which led me to believe there's a loophole somewhere.  I know my banker wouldn't lend out of the general area.

N/A N/A · Answer

What is a portfolio lender?  What do you mean by keeping it in house?

Michael Rossi · Answer

Sricenbaw,

You'll need to find portfolio lenders (those that keep their loans in-house).

Mike

Michael Rossi · Answer

I think a small local bank where you live and where you know someone would be best.

Mike

N/A N/A · Answer

Thanks Mike.  I was just reading on here about using smaller local banks and I had 1 question about that.  The properties that we are looking at buying are not in my state, would it be better to go with a local bank where the properties are located or where we live?

Michael Rossi · Answer

I have used 2 small local banks to purchase most of my rentals.  You'll need to find portfolio lenders (those that keep their loans in-house).  You can also buy some with owner financing; sub-2; with lease options; on land contract, etc.

Good Luck,

Mike