How did you get financing after your 4th property?

Question

Hi all. So I currently am holding a single rental property and am planning on financing 2-3 more in the near future. This means I will hit the limit of 4, after which most banks will not issue more loans (even though Fannie Mae allows up to 10). I wanted to survey the community to find out what other investors have done for property number 5 and up. Right now the most likely path appears to be finding a local portfolio lender to do the loans, or refinancing several properties together into a commercial loan to reduce the number of loans down below 4 and getting another conventional loan. How have other people dealt with this? Does anybody know of a national lender that will do 5-10 properties? Thanks!

Shawn Holsapple · Answer

I prefer local credit unions & State banks.  I have 20+ loans with no issues.  I also have sold several single properties from a blanket loan.  Since each asset is appraised individually in the beginning, the bank just takes off what I've paid from the original amount.  I then pay this amount at closing and the rest I can keep.

Michael Cohen · Answer

@Mike Day - I completely agree with @Neil Goradia - you don't want to do a portfolio loan covering multiple properties because when you go to sell one of them, you have to untangle the entire thing and start over. Many national lenders will go up to 10 financed properties.

Tom S. · Answer

@Mike Day  After 4 financed properties, I used some seller financing to buy more, but mainly small local banks that did portfolio loans.

Hope that helps!

- Tom

Neil Goradia · Answer

Hi @Mike Day,

I would avoid doing a blanket loan covering more than one property. While doable, it really makes things a pain when you decide to sell one of them out of the package in the future. They usually have to completely restructure the loan each time.

Personally, when we maxed out at 4 loans, we just started using cash from our 401k's, investors, etc. You'll need to start thinking about how to pay those sources back in a short time frame since I'm guessing you are a buy and hold investor and your funding sources wouldn't want you to borrow their money for 30 years. Maybe flip a property or two to build up some cash reserves, or partner with someone.

There's also a bit to be said about not over leveraging. In Indy you're probably safer than most cities but I'd stay away from getting loans on everything you buy. A lot more stressful when you have a vacancy and you still have to make mortgage payments....sometimes it plays on our emotions and doesn't allow us to make good decisions on tenants and other things.

Good luck!

Mike D. · Answer

@Shawn Holsapple

Do you have a particular local lender to recommend? :)

Jay Hurst · Answer

It has been said, but Fannie will go up to 10 properties. Should be zero problem for most lenders.

How did you get financing after your 4th property?

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