How to buy more than 4 houses?

23 Replies

Hello,

I am having an issue with loans. Conventional loans will only let you go up to 4 houses and that's it - can't buy anymore homes. How can you find lenders that will loan more then that? The most I've heard of is possibly up to 10 homes with a portfolio lender, but what happens after that? Private money only? A hard money lender would not be preferred in this scenario due to the goal of holding these properties long term.

Thank you! 

The portfolio lenders are all locally based lenders that lend and keep the loans in house right? How do you recommend going about finding one? 

Credit Unions

Local banks would offer commercial mortgage - around 5% 5 years arm for 20-30 years. You could take mortgage for your IRAs and buy properties inside them - this is non Recourse loans and they do not count toward limits

Use every conventional mortgage to buy 2-4 plexes - so you will have more cash flow (and debt :))) from one mortgage

My bank does up to 10 loans. 25% down and a quarter point higher after 4.

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Jane - From what I understand when the property is commercial, the # of loans doesn't matter. It's the residential loans that they care about. What do you mean by using up all the residential loans possible? Do you mean 4 properties and then move onto commercial?

Peter - is this a local bank nearby the properties you're investing in?

Originally posted by @Tony Nguyen :

The portfolio lenders are all locally based lenders that lend and keep the loans in house right? How do you recommend going about finding one? 

Yes that's correct.  You need to call around to banks and credit unions. Sometimes it may take a lot of calls.  Or, stop by in person.  Talk to someone.  They may recommend you to a bank or credit union who does these type of loans if their own bank does not.

Dawn Anastasi, Core Properties, LLC | http://www.coreprop.biz | Podcast Guest on Show #29

You may want to set up an LLC and go for a commercial loan.

Lots of good advice above.  I'll just chime in on big banks.

I just closed a fifth mortgage using Flagstar. As mentioned above, they want 25% down and a higher interest rate than under 5. They also wanted reserves for all our current properties. That meant Flagstar wanted to see six months "liquid reserves" which would cover all PITI expenses for each property we own. They also want to see a detailed picture of money flows, where your down-payment comes from, how liquid your money is (such as in an IRA, they wanted to see what it would take to get a loan from our retirement fund if we counted that money). This is a big lender, and they will go up to 10. There were more hoops to jump through than on previous loans.

Kerry Baird, UR Home Investments | http://www.urhomeinvestments.com

Fannie Mae upped the loan limits from 4 to 10 back in 2009.

Loans 5 to 10 require a different set of underwriting criteria per Fannie Mae (as @Kerry Baird  mentioned) and have worse terms:

  1. - 25% down for SFR, 30% for 2-4plex.
  2. - 720 minimum credit score.
  3. - 6 months of PITI for every property (can use retirement at 60% of value).
  4. - Need to see rental property income, usually tax return or lease agreement.
  5. - No foreclosures, bankruptcy, etc. within last 7 years (maybe wrong about this).
  6. - No cash out refinancing of properties 5-10 (maybe wrong about this).

Also, if you have 3 mortgages and you are trying to obtain mortgages on 4 and 5 at the same time, mortgage 4 will have to go through the same underwriting as if it were 5.

A few people I know that do this are:

@Robert Sepulveda

Shawn Huss at Talmer Bank (http://3069255281.brokersite.com/Default.aspx)

Steve Bighaus (http://teambighaus.com/)

Good luck!

Originally posted by @Rita Bautista :

You may want to set up an LLC and go for a commercial loan.

You don't need an LLC to get a commercial loan.

Rob,

That is true but it makes it much easier and it certainly gives you many more options. 

Good info here everyone. So it seems like there are still ways to get lending after the 4th property, you just have more hoops to jump through and it seems like you must speak to local banks and not the national ones. I'll start hitting the phones and walk-ins to find the right lenders.

This makes me wonder what happens after the 10th one. No one mentioned anything past 10. More hoops? Relationship-based? 

Checkout your local community banks.  There were quite a few podcasts about this method.  Make a list of every community bank and one by one explain to them what you are trying to do and see if they will loan to you.  You may get a lot of no's but don't give up.  It just takes finding that one of 2 banks that will lend to you.

When you do happen to have a bank that will lend to you be sure to have a portfolio ready.

Podcast 55 answers all your questions.  Have a listen from the point of view of a bank underwriter that approves loans.

http://www.biggerpockets.com/renewsblog/2014/01/30/bp-podcast-055-jimmy-moncreif/  

We just bought our 5th property in December (all our properties have mortgages).  Got in contact with a local lender recommended by our real estate agent, and it wasn't any harder than getting loans 2-4 (first loan was for our primary residence, so that was different than buying a rental).  Just had to send them all the same kind of info as before - tax returns, bank statements, current leases, etc.  As others above stated, you can get up to 10 loans now.

I use QuickenLoans and Schwab bank (QuickenLoans does Schwab's mortgages). They go to 10 loans and have had good rates for me so far.

After 10 go the commercial route like others are saying.  By then you will have a lot of experience and be able to present them with your history.  I made up a package which included my current rentals, past history and performance of the rentals, and the flips we have done.  I also provided my personal and business financials laid out for them to see.  It was no problem getting them to approve commercial loans for the business after that, even when all the previous history was in my personal name.  The terms aren't as good as the 30 year fixed but they will fund flip projects as well.  This is a local portfolio lender...  If I am going to buy another investment property as a rental I will likely use another 30 year fixed conventional loan as there is longer amortization and no points.  

Medium blackjack real estate squareWilliam Allen, Blackjack Real Estate, LLC | [email protected] | 850‑483‑1761 | http://www.blackjackre.com/blog | Podcast Guest on Show #163

I don't actually recommend buying properties in your own name. It's one of the reasons I prefer to associate with educated investors. A single liability suit could strip you of your entire holdings, not to mention the borrowing issues.

Yes - set up an LLC or LLCs as (a) holding company(-ies) to own the properties. However, use an S-Corp for the cash flow. That's the recommended structure. Set up a personal trust to own the other entities. Contact a legal/accounting professional for advice since I'm neither. Remember: control everything, own nothing. That's how you protect your investments and limit liability.

Your business(-es) will be able to get more credit than you can personally, and none of it will show up on your personal credit history, unless you default on business credit having a personal guarantee.

David Dachtera - good advice. I've never heard it structured that way, but it makes sense. I'm in the same boat. Closing on my 4th conventional loan here shortly. And now what? I was asked if I thought about starting an LLC for my new REI business. I guess it's time to start one.

Now I'm also looking to buy a commercial property for me and my husband's machining business. But we just got an LLC for it, so from what I hear, our 4yr old business is only a month old and has no history or track record to even try to purchase a commercial building.