All Forum Posts by: Lawrence Paul

If you have 5 to 10 homes in your portfolio, it is possible to get a mortgage, but it can be difficult.

• In 2009, Fannie Mae increased the maximum financed-property limit from four to ten.
• Most banks won’t offer a 5-to-10 properties mortgage because the process of underwriting the investor’s mortgage application can be very hard work.
• To finance a home via Fannie Mae’s 5-1o Properties program, there are many criteria that must be met, including a minimum credit score of 720, substantial down payment requirements (for purchasing) and equity (for refinancing), no bankruptcies or foreclosures in the past 7 years, and more.

Real estate investor mortgages

In 2009, Fannie Mae rolled back a mortgage rule that prevented real estate investors from financing more than 4 properties at once.

At the time, investors were limited to 4 properties financed, which included their primary residence.

Today, the maximum number of allowable, simultaneously financed properties is 10. You wouldn’t know it, though — few banks actually offer the program.

You can finance more than 4 properties at once

You can finance more than 4 properties at once

In February 2009, Fannie Mae said it would up the maximum financed-property limit from four to ten to help stabilize the U.S. housing market.

“Experienced investors play a key role in the housing recovery”, it said.

This is a truth.

Real estate investors buy foreclosed homes, multi-unit properties, and vacant condos as a means to build wealth long-term.

And now, with rents out-gaining the rise in home prices in U.S. cities such as San Francisco, California; Fort Worth, Texas; and Seattle, Washington, investor types are clamoring for good homes — especially with financing so cheap.

15-year mortgage rates with points are below 3 percent.

Despite market options, though, investors can find it hard to find banks which offer financing for people with more than 4 properties already financed.

Even seven years later, Fannie Mae’s 5-10 Properties Financed program remains a niche product.

Maybe you’ve been turned away by your bank, too.

Why most banks won’t do a 5-to-10 properties mortgage

So, why don’t all banks participate in the 5-10 Properties Financed program? The probable answer is that underwriting a 5-property-owning investor’s mortgage application can be very hard work.

As compared "traditional" homeowners who submit for loan approval with just a W-2 and pay stub, a seasoned real estate investor is asked to provide complex tax returns, complete REO schedules, and extra detail for every home underwritten and approved.

Reviewing paperwork takes time. Sometimes, a lot of it.

Furthermore, investors with 5 or more properties financed are more likely to hold title to their homes in a non-standard fashion.

This, too, creates “extra work” underwriting which slows down the approval process for the subject home and for every other loan with the bank, too.

As compared to a standard purchase loan, loans for investors with more than 4 homes financed generates the same bank to the bank but with more man-hours required to approve and additional fraud risk post-closing. It’s no wonder most banks avoid them.

Note : Most banks, not all. You have to know where to find a 5-to-10 Properties loan. Then, you have to meet its guidelines.

The 5-10 financed properties program criteria

To finance a home via Fannie Mae’s 5-10 Properties program, the following criteria must be met with no exception :

• Own between 5 and 10 residential properties, each with financing attached
• Purchase : 25% down payment is required for 1-unit; 30 percent is required for 2-4 units
• Refinance : 30% equity is required for all property types (1-, 2-, 3-, or 4-unit)
• Minimum credit score must be 720
• There must not be any mortgage lates within the prior 12 months on any mortgage
• There must be no bankruptcies or foreclosures in the prior 7 years
• There must be 2 years of tax returns which rental income from all rental properties
• There must be 6 months of PITI reserves on each of the financed properties

That’s pretty much it. Tough, but not too tough.

You can even combine the delayed financing rule with the 5-10 Properties program to take cash-out from a home purchased free-and-clear at auction or otherwise.

5-10 rule is for property owners who have to listen to rules set in place by Freddy/Fannie to purchase their 5th property.

Just recently purchased my 4th property and was wondering your guys thoughts...

Should I pay off my 4th property or wait two years to quality for the 5-10 rule?

QUESTION:

I must wait two years of tax returns for my most recent rental property to 'season' before I can purchase a 5th, then wait two more years to buy the 6th, then two more years to buy the 7th, then two more years to buy the 8th, ect, ect..?

I am a newer investor and just bought four in the last two years alone...

• Own between 5 and 10 residential properties, each with financing attached:
• Purchase : 25% down payment is required for 1-unit; 30 percent is required for 2-4 units
• Refinance : 30% equity is required for all property types (1-, 2-, 3-, or 4-unit)
• Minimum credit score must be 720
• There must not be any mortgage lates within the prior 12 months on any mortgage
• There must be no bankruptcies or foreclosures in the prior 7 years
• There must be 2 years of tax returns which rental income from all rental properties
• There must be 6 months of PITI reserves on each of the financed properties

THANK YOU!

So, I just hit the magic #4 property.

I have a small concern, however.

I have three rentals and am living in a property that I will convert into a rental after I have been living here for one year.

If I purchase my 5th property as a primary residence and convert the prior primary into a rental (total of 4 rentals and 1 primary), can I still put down 5% for my new primary and not be subject to the rules of the 5-10 property requirements?

I am sure that someone knows this answer because they either have done this or know someone who has done this.

EDIT: 

How does the mortgage play a role?

Thank you so much!

Any idea where to download a standardized purchase contract for Pennsylvania?

So, my neighbor has came up me and said that he would like to sell his property to me.

He is aware that I am an investor.

I am just not sure about the steps/transfer/legal actions that would need to be taken because I have always went through a Real Estate Agent for my other five transactions.

Did some google searching, but nothing that helped answer my questions.

Thank you, as always!

Thank you for all of the ideas.

Currently have tenants in both units and their leases expire on 08/01/2021.

Thinking about just holding my cards and 1031 exchanging into a 4-plex of some kind.

Would really love to 1031 into an 8 unit type, but my net worth will not cover the commercial real estate requirements.