I just purchased my tenth house on Monday and all was fine and put an eleventh house on an earnest money contract on Wednesday to be closed July 31st. What I have been doing to purchase my houses is getting a short term earnest money loan from the bank, to do a cash closing at the Title Company, then turning around and getting a hard money loan, then a conventional loan. When I would get the hard money loan I would pay down on the equity loan, and when it would go conventional I would pay down on the equity loan. So far this worked for ten houses. When I got to the eleventh house I was told there was a 5 houses minimum for a portfolio loan. The terms were a 4 point documentation fee and 6.5% interest with a 5 year balloon or 7% with a 10 year balloon. Currently I am paying 4.5% to 4.85% on a 30 year loan on the 9 houses and it will be the same on the tenth house. My net is $600-$800 per house. The equity loan is only good for 3 years then needs to be paid off in full. It's a 3.5% interest only equity loan. I borrowed $118,000 from the equity loan on my last purchase so the interest is $344 per month. What am I supposed to do after the tenth house? My business partner has a master in finance and will no allow me to roll 5 houses into a portfolio loan because of the unfavorable terms. I was told to figure it out and was told that we would spend all the profit paying down the eleventh house if necessary. My question is how do I buy more houses with these terms? The equity loan is not enough to buy 5 houses at a time even if I got the houses at a deep discount.
Portfolio lenders are able to make up their own guidelines, so I would look for a different portfolio lender that is interested in loaning on one house at a time.
Also, are you married? We started off with our first three rental houses and our home loans in my husband's name. We have the next 2 under contract and I am able to buy them in my name using just the income from the first 3 and the new purchases themselves. Since these are my first loans, we are able to put just 25% down (20% for single family) on these two and the next two after that. Then we will both be on loan #5 and have to put 5% more down for the next loans until we get up to 19 rental properties, then we can will have to look towards a portfolio lender or paying off houses if we want more conventional loans.
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There are lenders out there who will do portfolio loans. B2R is a sponsor here on BP. If the terms are not favorable to your partner, find another partner who is OK with the terms. Private money can be had from self directed IRAs. Just have to keep making the calls and finding out who will do the deals with your terms.
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