Obtaining multiple mortgages in 2021

4 Replies

In 2021 we would like to obtain a handful of $450-850k SFH or Townhomes for buy and hold rentals.

What problems might we encounter when using conventional/ traditional financing more than one property at a time and what type of mortgage rates should I be anticipating? All the financing will be done in using my spouses income, $300k, and just in his name. We own our primary residence without a mortgage and will be doing a cash out refinance on it in January as soon as we get our taxes completed.

Assuming we have 20% cash down on each property what hurdles can we expect to have? Can this even be accomplished? :) any tips would be greatly appreciated.

(These houses are all new construction and would be built in 10 months in resort towns where the markets are exploding. I know this is lazy investing but it’s simple and right in front of my face! I currently have rentals in these markets.)

For example:

Duplex $833k $166k down

SFR $743k $149k down

SFR $650k $130k down

Townhome $575k $115k down

Townhome $575k $115k down

Townhome $475k $95k down

Townhome $475k $95k down

TIA! - Sorry for the financing ignorance! We have been self emp for the last decade + and have never qualified for traditional financing; had to seller finance before I even knew what RE investing was hah ;)

I use to do something similar hahaha. Since you will be getting investor mortgages, expect to pay 25% down. Some lenders will do 20% down. Rates for me have been around 4%. Normal rates are around 2.5-2.8% but it's a little higher when you declare it's for an investment property. You will do fine until you have 4 mortgages under your Husband's name. At that point they make it a little harder. Some lender won't even lend you anymore. At that point I began getting mortgages under my wife's name.


Then, once you have enough mortages you begin running into debt to income ratio. In the eyes of a bank, you have too many payments for the amount of money you make. You will then need to find a bank that will take into account rental income as income to offset this. Most, however, will only allow it once you have declared it on your tax return. It is possible to do this until you have 10 mortgages each.

But no worries, if you get to that point, you can always continue getting mortgages with hardmoney lender or portfolio lenders to name a few. This mortages are usually more expensive though or have adjustable interest rates. You just need to look for better deals to offset this.

Regards,

@Kristen Twomey For conventional financing, it's great if you own your home free and clear - that way you only need your self employment income to cover your home's taxes and insurance, along with other monthly debt payments. Assuming you qualify income-wise to cover those personal expenses, conventional financing should be possible. If you're buying and financing one at a time, you just need to have them leased out before moving onto the next. 75% of the lease must cover the rent in order to preserve your DTI. You should be able to use the appraiser's opinion of market rent (75%) to qualify, just make sure it covers the monthly payment or you'll need more of your own income to make up the difference.

If you own it and it's not leased, you won't be able to count the rental income on the next purchase.  If your plan is to rent them out on AirBNB without an annual lease, this won't work.

As you acquire more and more properties, you'll need more $$ in reserves and higher credit score to qualify.  

@Kristen Twomey There are other options. I own 3 four plexes and none of them are on the traditional government backed loans, meaning they don't count toward my 10 max allowed. I have one on a portfolio loan which that bank allows up to 12 portfolio loans with them. I did 10% down on that one when I got it, no PMI. I know of another bank that is still doing 10% down locally up to 2 properties. Then my other two are on a commercial loan at 15% down, which is actually even better since it is held in the LLC name and doesn't even appear on my list of debts. The only downside to that is that it is a 20 year amort so payments are higher. The point is that there are many financing options. There is always a way to make a deal happen if you are willing to put in some effort. For some people that may simply be to find a partner that can fund it. I have some commercial land that was bought with a partners cash. We paid $650k and now have it currently listed at $1.5M. I could not have financed it on my own and since it was such a great opportunity, I found someone else to help make it happen. Now that deal has led to more deals that are in the works. And that land deal came because of the two four-plexes bought with the commercial loan. One thing leads to another and it just keeps snowballing! Sometimes even not-so great deals are worth it for the other benefits they bring.