I maxed out my loans, almost!

14 Replies

Hi guys,

I am on loan number eight and I have two more in my sights. As I live in Japan and earn a pretty good salary, I am not doing anything unconventional, just buying with 20% down on properties I'm finding through agents and some turn-key. If I want to continue buying these types of properties, what are my options?  Any recommendations for private lenders that do long-term loans on market price properties or portfolio/commercial lenders?

Thanks,

Daniel

As you already know, you must go portfolio or commercial after you reach loan #10.  Most RE investors have luck for small, community banks for these types of loans.  Since you are in Japan that would make that part difficult.  You would have to locate one in the next area that you would be investing in.

@Daniel Mills Depending on the bank you are using currently they might have some portfolio loan options for you to consider.  The other alternative might be to use a mortgage broker.  A broker is someone who represents multiple banks.  So rather than you calling all the banks in the area of your properties a broker would be good because they have already called them all.  Not every bank will allow a broker to represent them so there will be some other choices depending on how many banks are in the area but the broker might have found some choices that you didn't know about either.  Hope this helps!

I am assuming that you are interested in the better terms that a conventional loan would provide over another type of loan. That is part of my own strategy.

If your existing loans are in your name only, and your wife has income to qualify on her own, each of you can get up to ten conventional loans.

Alternatively, if you have a small loan (your profile says you have properties in Memphis) that you are close to paying off anyway - and can pay it off now - consider opening up that spot in favor of a future more-expensive property.

There are options but things get tight after 10.

If you have 2 left, I would recommend using those two for 3-4 unit multifamily. It is still considered residential and you can get a longterm fixed rate, and allows you to scale up a little faster than buying two more SFH.

After 10, your options are to either go commercial (multifamily 5+ units) which makes more sense than using a commercial loan for a SFH, or go to portfolio loans through smaller banks which are typically 5 year ARMs.

As was mentioned, your wife can potentially get 10 more loans if she qualifies.  But...don't count on it being as easy as the first 10.   They will look at your joint tax returns and your stuff will be on there too.   

Gets tight after 10.  

  

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Everyone mentioned some great points.

The only thing I would add is that you can look for homes with owner financing.

@Daniel Mills do you play settles if Catan and trying to build the longest road. Well that’s what this 10 Fannie Freddie loan goal is like. I bought a dozen of these little sfhs with Fannie Freddie loans and realized that it was not the way I should have gone. It was not scaleable.

@Daniel Mills - I would agree 100% with Lane and evaluate the current portfolio, given the market condition It's going to be difficult. If you are confident take your portfolio to local banks and see what they say. Lately I have seen lenders not entertaining the PIGs portfolios. Also they dropped limits to 65% from 85% for quite sometime. Please check the link for the market pulse

https://www.apartmentlist.com/rentonomics/rental-i...

https://www.bloomberg.com/news/articles/2017-10-26...

Good Luck

Vivek 

@Daniel Mills   I'm sure there are other lenders that do as well with a portfolio product.   Portfolio doesn't always mean a higher rate.  Andrew made a good point that a broker may be a good option as well as they have many sources to satisfy most niches.

Hi guys,

Thanks so much for your advice. This is giving me a lot to think about. My situation is a bit unique. For example, some of you have mentioned that I could get additional loans through my wife, but this isn't possible because she isn't a US citizen and we don't live in the US. Also, while I do plan to move into multi-family and scale like @Lane Kawaoka suggested, there are some reasons why I also plan to keep and build my single-family portfolio. The first is that i am unable to use 1031 exchanges to move into bigger properties. I am a Japanese tax payer and since they are not allowed in Japan, I would be stuck paying the taxes here. Cap gains tax here is 40% if you sell a property within five years of buying it! One of the advantages here though is that I can depreciate the entire value of property in just a few years directly from my salary. As an example, my fellow professors where I work pay about $10,000 a year just for what we call citizen's tax. My wife and I only paid $500 because of the depreciation. This depreciation allows me to be classified as a low-income earner here and effects how much I pay for things like child care and other government services. if I own multi-family, it doesn't have the same tax benefits because it's considered a business. So, I think I am looking at a couple of strategies to continue building the single-family portfolio like portfolio loans and just paying off the lower priced properties. i might also look into getting a partner who could get the loans for me. Thanks.

I also will look into owner financing too, but as I live in Japan it's a bit difficult for me to find some of those deals.

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@Daniel Mills just remember why you are doing this... for the passive income not another job to manage the mangers.

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