Rental Property Investor · Katy, TX · Member since 2015 · 49 posts · 10 votes
Hello everyone,
Would you share your experience selecting the lender for your first 10 rental properties? Since you can get conventional mortgages with Fannie/Freddie, what criteria do you use to choose a Bank?
Or would you consider private lenders for those first properties? In talking to some fellow investors, some mentioned that private lenders could be more expensive. On the other hand, there are private lenders who offer portfolio loans for when you need more than 10 rentals, then would it be best to just start with those so you can keep going beyong 10 properties?
Regarding pre-qualification, in getting pre-qualified with 2-3 lenders to compare rates and services, does that hurt your credit?
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Tatiana C. thanks for the offer to reach out. And thanks for the mention @Chris Mason. Since others might search for this subject later I wanted to provide a quick list of questions I would recommend ANY investor to ask their lenders. As investors we have very specific needs when we purchase properties. These questions are designed to help us identify "investor friendly" lenders. So whomever you are thinking about using...ask these to see what their responses are. Oh, and if they say a lot of "I don't know...let me ask" that also might be a flag that they aren't used to working with investors.
Questions for Lenders
When do you start using rental income to help me qualify? (the answer needs to be immediately)
When do you start using “After Repair Value” on my property?
How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
Can I change title to my LLC?
Do you sell your mortgages?
What is your loan minimum?
Can you explain to me what your reserve requirements are?
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
@Tatiana C. Don't put the cart ahead of the horse.... work on getting the first loan, if you like them, use them again. If you dont, use someone else.
No reason to go for more expensive portfolio and private loans if you can qualify for cheaper conventional. Max out the cheap loans and then go for the portfolio loans.
Unless you are buying on an LLC, then your choices are more limited
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
It's not crazy to ensure you're working with a lender that doesn't stop a 4 financed properties. Most lenders stop at 4, so then you've got to start all over with an "unknown" and at this point your personal finances are 3x as complex so who knows how that will play out (none of our required pre-licensing education or continuing education covers REI stuff, you only have to know plain jane SFR owner occ W2 to get licensed). Generally if an LO can handle 4 (& you will know by this point) they can handle 5 or 7 assuming their platform supports more than 4.
I would call @Andrew Postell. Texan, Former Marine, BP member.
Good insigh, I really appreciate you taking the time to help me. You have a good point, i'll certainly keep that in mind.
Buying or not in an LLC is another question i have in my mind. Some say that the safest approach is buying max 3 properties in each LLC. On the other hand, that limits you like you said, as I believe you will need to creat reserves within each LLC so that finance is made possible.
If you have more to add to the LLC comment, would you mid sharing more thoughts?
Many thanks again! good luck in your investmenst, God bless.
Thank you so much ofr sharing your thoughts. Great point! I have not thought about that. That's certainly a benefit of going with a single lender so that the financing process is made easier. And i can appreciate that, as i'm very busy with a full time demanding job. The pre-qualification process can be demanding too.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Tatiana C. thanks for the offer to reach out. And thanks for the mention @Chris Mason. Since others might search for this subject later I wanted to provide a quick list of questions I would recommend ANY investor to ask their lenders. As investors we have very specific needs when we purchase properties. These questions are designed to help us identify "investor friendly" lenders. So whomever you are thinking about using...ask these to see what their responses are. Oh, and if they say a lot of "I don't know...let me ask" that also might be a flag that they aren't used to working with investors.
Questions for Lenders
When do you start using rental income to help me qualify? (the answer needs to be immediately)
When do you start using “After Repair Value” on my property?
How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
Can I change title to my LLC?
Do you sell your mortgages?
What is your loan minimum?
Can you explain to me what your reserve requirements are?