I seem to always hit a snag when trying to get a loan for my 11th property. I have a few that I would love to get loans for , but seems like the interest rate jumps when I get to #11.
Does anyone have other options with similar rates for loans? Can I lump several properties together and get one large loan? All are cash flow positive and have been owned for 5+ years.
@Christine Kankowski You need a portfolio lender. There are some Mortgage Brokerage companies offering this service. You need to call around where you live, someone is doing this with other investors. Or ask fellow investors who they use. Some in a landlording group may have answers too. Landlordmoneystore dot com claims they will lend on 10+ properties. Never used, so I do not know....
I would not recommend lumping properties together to create a larger loan. It may seem like a great idea now, but later its not fun pulling out 1 property for something, unless you can find a lender cool with that, I never could.
Best of luck to you!
@Christine Kankowski yes, the 11th loan is going to have a higher interest rate. On loans #1-10 you are likely receiving "conforming" loans - meaning, loans governed by Fannie Mae and Freddie Mac. Those loans have unlimited funds, a secured by the government (essentially), and in some cases if you foreclose the bank get's their money back. Super low risk for the bank itself. However, Fannie/Freddie will only lend to 10 (there is an exception to this if you are buying your primary home) so what type of a loan do we get after 10? These loan types are sometimes called commercial loans but they are commonly called portfolio loans....since they come from the bank's own portfolio of money. The bank calls the shots on these loans....not the federal government.....so it could be easier to qualify....but there is also has a limit to how much the bank can lend....and it's more risky for the bank to lend it. And since interest rates are all about risk you should always expect a higher rate on these. OR maybe that rate is adjustable. OR maybe it's a 15 year term. I've even seen all three of those on a portfolio loan before.
Anyway, I probably rambled too much there but that's the reason why you are receiving a higher rate. Hope this helps in some way.
@Christine Kankowski I have talked at length about this very subject. As any investor goes, eventually they get to this point. You can get Fannie Mae loans beyond 10 financed properties, but in order to do so, you must also get portfolio or commercial financing set up. Fannie Mae view's LLC's differently then they view Sub S or C Corp loans.
If you were to take 1 or more of your existing portfolio and move it to a Sub S and then refinance it with a portfolio lender, you then have opened up the slots of available loans that you can do through Fannie Mae financing. Fannie Mae doesn't consider a property that is financed in the name of the Sub S or C Corp to count in the 10 financed property rule, because its commercial. This is true, even if you have to sign as the guarantor of that loan on a personal basis. Primarily because the loan is in the name of the Sub S or the C Corp.
So look at investing like this; you should hold all properties in your personal name up to the point of 10 financed properties. From there you move as many properties as you wish to open slots for into the Sub S and get portfolio financing on them. By doing this, you can always buy your new homes as a Fannie Mae loan. I would age out my oldest financed property or the properties with the smallest balance to the portfolio loan, and minimize the higher rate that way.
Below in the actual Fannie Mae guidelines.
See below from the reference guide for FNMA multiple financed properties in MyKey. If they own 25% or more of the LLC or partnership then it would count.
Type of Property Ownership to include in Financed Property Count:
Joint ownership of residential real estate. (This is considered to be the same as total ownership of an individual property).
Note: Other properties owned or financed jointly by the borrower and co-borrower are only counted once.
Joint or total ownership of a property that is held in the name of a corporation or S-corporation, even if the borrower is the owner
of the corporation; however, the financing is in the name of the borrower.
Obligation on a mortgage debt for a residential property (regardless of whether or not the borrower is an owner of the property).
Ownership of property that is held in the name of a limited liability company (LLC) or partnership where the borrower(s) have
an individual or combined ownership in the LLC or partnership of 25% or more, regardless of the entity (or borrower) that is the
obligor on the mortgage.
Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined
ownership in the LLC or partnership of less than 25% and the financing is in the name of the borrower.
Ownership of a manufactured home and the land on which it is situated that is titled as real property
Type of Property Ownership NOT to include in Financed Property Count:
Ownership of commercial real estate.
Ownership of a multifamily property consisting of more than four dwelling units.
Joint or total ownership of a property that is held in the name of a corporation or S-corporation, even if the borrower is the owner of the corporation and the financing is in the name of the corporation or S-corporation.
Ownership in a timeshare.
Ownership of a vacant (residential) lot.
Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined ownership in the LLC or partnership of less than 25% and the financing is in the name of the LLC or partnership.
Ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home).
As others have stated...you can get a portfolio lender to lend on the 11th property. Each lender has a limit though. We broker for a lender where the max exposure is $3 Million. If you have 10 properties or more in California, you should be able to structure a commercial loan in a way that would absolve you of personal liability, thereby allowing unlimited properties to be financed. You just have to be a commercial client...meaning a corporate structure etc.
If you are not married, here is a good case for marriage if I ever made one, Christine: each of you can get ten conforming loans.
Of course, marry wisely- the spouse should have enough income and good credit to qualify for a conforming loan, good looks and dishwashing skills aside.
Also, since this would be a business tactic, let us know if the IRS would allow you to write off the wedding and the honeymoon as a business expense... Unfortunately, I married long before I got into the business. At least I enjoy doing the dishes.
Our portfolio product has no limit to number of properties financed. The rates are lower than any investment loans I have seen. However, we do require 30% down on the product. (For 1-4 unit investment properties only).
@Christine Kankowski I hit my limit on portfolio loans a year ago and lending options especially where homes are these days just don’t work. You are looking a lower ltvs and 6+ percent interest plus points. The best local bank loans were 75 Ltd 5.25% 5 year reset for 25 year am.