How can You Own More than 10 SFR at Once?

Question

Hi Everyone,

I am investing in SFR properties around the Phoenix area, and I came across something that confused me. I've been reading on BP about how a lot of you guys own 20+, or even 50+ SFR rentals. I understand that the mortgage limit with most banks is 4, but some can go up to 10. So my question is: How do people have MORE than 10 properties that they currently own and rent out? I'm assuming they all have a mortgage on each property to maximize leverage, right?

I will be buying my properties through an LLC, and partnering with somebody who will be able to get approved for the mortgages. In this case, would the mortgage limit still be 10 for us?

gilbert, scottsdale, arizona, mesa, chandler

- Nick A. Religa

George P. · Answer

Wrong.  There are at least  20 factors why houses are better investments than multis.  One of them being, you can sell a house at a drop of a hat to anyone... Anyone... You can sell multi only to an investor, no homeowner will want it.

The rest of the responses were correct

Brandon Schlichter · Answer

Thomas S. - Appreciation on SFDs in many cases surpasses MFDs in a pretty high number of areas. I know that's the case around here, additionally rental demand for SFDs are higher than multis which can result in better tenant pools. Just picking only multis doesn't always guarantee success, and for me  I'd MUCH rather prefer a balanced portfolio - Multis for high cashflow, singles for equity and liquidity.

Thomas S. · Answer

True but investing in rentals is referred to as "income properties". Risk mitigation is essential to successful investing. SFH = Higher risk, lower income.

Purchasing a property as a potential appreciation move has nothing to do with investing in "income". Appreciation can be a strategy but not in regards to the specific purpose behind rental property ownership. Yes we all profit from paying down a mortgage and from appreciation at some point in the distant future but until you reach that point you still need to pay the bills.

Two different animals, different concept, Investing verses speculation. Nothing wrong with the concept but not strictly the business portion of what we are into.

I would never invest in SFHs due to the higher risk, higher maintenance, and lower monthly return but I have always held true to the concept of "income investing" and I have done very well by it. Market fluctuations (2008) never impact my business. The value of my investments is driven by rental income not arbitrary real estate values where as renters in a SFH devalue a property.

David Faulkner · Answer

Good answer ... I'd also add that an investor may not actually need to own more than 10 properties, if they are high quality properties. Often times it is better to focus on quality over quantity. 10 x 4-plexes is 40 units ... for example, if you can't meet your investment goal with 40 high quality, reasonably leveraged units or less in scottsdale, you may want to reassess your strategy IMO. Now you may need to start more modestly and strategically 1031 exchange your way there, but that is a much more desirable end game IMO ... only thing better would be 40 free and clear units in Scottsdale, but if you start with reasonably leveraged units, you will end up with free and clear units in 30 years if that is your desired end game.

Wayne Brooks · Answer

The 10 "mortgaged properties" (not 10 mortgages) limit is only when applying for conventional mtg.s, Fannie and Freddie.  You can still get portfolio and commercial mtg.s.

Nick Religa · Answer

Thomas S.

Well in certain markets that I'm looking at, there aren't many MFHs, and demand is much stronger for SFHs. But I do see your point, thanks!

Thomas S. · Answer

Better question is why would you want to own 10 SFHs when the return is so much lower than owning MFHs. The math on SFHs simply does not add up unless you are speculating in a very high appreciation market.

Brandon Schlichter · Answer

There's no limit to commercial loans.Everyone talks about 'the limit' because they see the 0.5%-1% discount on residential loans as invaluable and make a decision not to pursue rentals beyond that point.

Nick Religa · Answer

@Jd Martin

Okay, thanks for the info!

JD Martin · Answer

If you're not a guarantor on his loans it shouldn't count against you. You're going to have to put personal guarantee on the properties anyway even if they are in an LLC.

How can You Own More than 10 SFR at Once?

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