Lenders Cash Reserve Requirements workaround

[Callum K.]

So I was listening to a podcast yesterday and I heard someone mention that when you borrow for loans in excess of 4 mortgages, lenders require 6 months cash reserves for the sum of all mortgage payments.  They went on to mention that it results in quite a bit of money being set aside for reserves.  Although I personally believe that you can never have too much cash, I do understand the hurdle with saving this kind of money just to get a loan.  I am in the process of acquiring my 9th financed property (trying to get to 10 before rates increase) and on my 5th house I was able to convince my lender to use my 401k plan for my cash reserves.  It took a little convincing and I had to provide them with the terms of withdrawing money should I need to use those reserves and the lender took 60% of the account value. 

 I thought I would share this in case others find themselves in a similar situation.  Just because your 401k is in a retirement account, doesn't mean its necessarily an illiquid investment.  Now, for each property I buy, all i have to do is give them my statement for my retirement account and since I am too young to be withdrawing from my 401k the 6 months reserve is no longer an issue.

[Russell Brazil]

I think it standard that the lenders count a percentage of your retirement accounts towards reserve funds. Its good you knew to do that...the lender should have already been aware of that.

Also it is 6 months reserves on any investment property I believe, not just numbers 5 through 10.