5-10 properties/ mortgages at the same time

7 Replies

Hello all,

I'm currently in the process of zeroing in on a REI strategy. I will most likely go the TK SFH route through one of the more reputable companies I've found here on BP.

Ideally, I would like to make my investment in one go, buying 5-10 properties as a package. My credit score is solid (780), I live overseas but have had my job here now for 5 years, making the equivalent of about $50k USD annually, 0 debt, and plenty of liquid cash.. enough to buy 10 properties (worth 100k) with 20% down, or fewer with higher down payments. I am after cash flow, as close to $2k per month as possible.

I had a few questions though:

1. Are lenders comfortable underwriting this many mortgages at the same time?
-->*note: after making Down payments, I will still have reserves to cover 6 month PITI for about 7 properties.

2. Will my DTI be a disqualifier/problem as the number of doors (and debt) increase?
    --> According to some sources, the most I can qualify for is 4.5x my annual income, this wouldn't enable me to do a great deal in terms of investing/scaling.

3. Assuming I'm capped from a mortgage standpoint, what do you think of putting down 30/40% down on fewer properties (4/5)?

I will take these very questions to the preferred lenders of the various TK companies too, but wanted to pick the brains of the BP community first to gain a greater understanding from the investor/lender community. Thanks!

1. Are lenders comfortable underwriting this many mortgages at the same time?
 - Private money lenders would be willing to underwrite a portfolio purchase. If you have previous real estate ownership experience you will qualify but if you have 0 real estate holdings or 0 fix & flips you will not meet the requirements. Private money lenders are beneficial for investors looking to grow quickly and without a cap on properties.

2. Will my DTI be a disqualifier/problem as the number of doors (and debt) increase?
DTI is something that will be an issue as you scale your business. The DTI issue is avoidable if you are proactive and create a REI LLC. Once you have the LLC you can utilize private lenders who will put the debt on your LLC and not your personal name. This allows you to maximize the lending you can receive from a conventional lender and maximize the growth potential of your portfolio.

3. Assuming I'm capped from a mortgage standpoint, what do you think of putting down 30/40% down on fewer properties (4/5)? 

There is very little benefit of putting more capital down on less properties. If you do not have ownership experience you should buy 1-2 properties from a conventional lender(CU & Local Banks) and then get in touch with a private money lender with the goal of acquiring 5+ properties ASAP. The issue with private money is that you are looking at around 20% down regardless of exit strategy but they have products that can help with value add purchases unlike a conventional lender.

@E Ibrahim hope this helps answer some of your questions DM me if you have any more.

You should have 9 mths reserve not 6. The down payment of 30% is adequate but what is the DSCR?
Minimum values should be $150K per property

Buying this many properties at once will need to go to commercial loans. The loan is evaluated based on the rent income and tax/insurance/HOA/other expense. If DSCR is greater than 1.2, you should be comfortable to qualify a loan. DSCR = (rent income - tax - insurance - HOA-other expense)/mortgage payment. Your credit score is strong. DTI doesn't matter here. Usually 80% LTV for purchase and 75% LTV for refinance. So if you are confident about the rent income, this is doable.

You could use conventional lender,this is not complex at all. As long as it's cash flowing with DSCR > 1.3 , your DTI will not be impacted as every appraisal will utilize the 0.75*rent.

So for your question #1-#3, the answer is yes yes yes, as long the house is cashflowing nicely at least on paper and appraisal.

Thank you all for your responses and insights.

@Blake A. Rivers  thanks for that comprehensive answer, you've given me a lot to think about, specifically with PML. Since I have no RE experience, don't think I'd be a good loan prospect now, but something to look into for the future.

@Wenda Wang

I ran the numbers using a pro forma with pretty conservative numbers from Memphis Investment properties.. assuming a 30 year mortgage at 4% interest and the purchase of 7 doors at 20% down, the DSCR comes out to 1.45..

From what I know however, commercial loans tend to have shorter terms and have higher + adjustable interest rates, and balloon payments... I am not really motivated in pursuing commercial loans since the typical terms can really kill cash flow which is what I'm after. Additionally from what I understand, commercial lenders generally only loan to experienced landlords, which I am not.

@Carlos Ptriawan

don't lenders only use .75x rent only after its been with the investor for at least a year and reported in tax returns? On another note, I'm glad to hear some conventional lenders may go for this.. It really isn't complex when I thought about it, and in my mind it's a win win for the bank and myself.

@E Ibrahim : No, SOME lender can use 0.75 rent calculation immediately from the rent number given in appraisal. You don't need to wait one year of that to show up in tax return. 

You just need to do little bit of shopping, I know some conv lender that could do that but wouldn't mention publicly.

I'm also same like you, when I bought I bought minimum two.