Effects on FICO Scores

[Wesley Acevedo]

How are FICO scores affected when you start taking multiple loans to fund your investments?  I’ve been watching a lot of videos about real estate investment and have found answers to pretty much all questions I’ve had with the exception of this one. I know hard inquiries stay on your record for at least 2 years and with every loan, your age history decreases, but I don’t know the impacts of that on a large scale. Let’s say I buy 1 house every year, how would that affect my credit in the short and long term?

[Andrea Weule]

Up to about 4 properties it doesn't have the worst effect on your credit score.  Especially if you have a decent amount of available credit sitting via credit cards or credit lines.  I've found that after 4 going up to 10 it gets much harder to qualify for a personal loan.  They expect you to have tons of money just sitting in an account for reserves.  

Personally, as we grew to our 24 properties, after 3 loans in our personal name, we went after commercial/portfolio loans in our various LLC names. We look for small local banks/credit unions that will lend to our llc (we have to personally guarantee as owners of the LLC, but it doesn't show up on our credit unless we should default). We want a bank that holds the loan in house - they don't sell to another bank like most freddy/fannie loans do. We want the loan to be based on appraised value of the property as a cash flowing property and that they do not have any or minimal seasoning requirements.

Everyone's credit is different, but too many high loans will definitely take an effect over time.  As you grow, I recommend exploring in house loans instead of traditional.  It may have a slightly higher interest rate, but they're much easier to get since they're based more on the property than you. 

Best of Success!