Investor · San Francisco, CA · Member since 2013 · 35 posts · 8 votes
Hi Everyone,
I am a buy and hold investor looking to purchase a few SFH's. Assuming you have enough money to buy several SFR's at the same time and you are trying to get 20% down conventional financing, are there ANY options to get multiple deals done at the same time? Considering you had enough money to fund 5 homes in your market, what is the quickest way to get these done using conventional financing? It is taking me forever, having to buy one at a time. It is not meeting my personal timeline goals. At this pace I can only close on about 2 per year. You know how it goes... The hunt takes a long time then all the inspections and underwriting takes the rest. Meanwhile my cash is sitting unused but I want to deploy it all if I can. However, when you're getting a loan, they make you sign a sheet that says while underwriting is underway you will NOT be involved in any other deals or making other offers anywhere. Really gets on my nerves. Has anyone found a way around this besides a commercial loan?
Yup, you can close multiple escrows concurrently. Note that "concurrently" in this case means at the exact same time. So if you have 4 in contract, all 4 close at whatever time the slowest of the 4 would close by itself. Realistically, this can mean that you write offers with 60 day closes, get 2 tied up in contract, then over the course of the next month get two more tied up in contract with 30 day closes. Maybe a fifth one pops up with 3 weeks to go, but the lender already has all of your paperwork, so that one can be a 21 day close. In that simplified example, all would close 'on time' relative to the relevant individual contracts.
Alternatively, you can purchase using hard money and then when there will be a break in the purchasing, do a batch refinance with concurrent closings.
What you cannot do, unfortunately, is have staggered closings. Meaning that you have 3 escrows open at once, and they close a week or two weeks apart each. That's a no-no. Each time the LO, underwriter, and underwriting manager, get a ping saying "$400k in new debt appearing on credit report! Danger, Will Robinson!" -- that's an underwriting reset. Will screw your timing 3 ways from Sunday. Stack that with a last-minute trip to South Korea to visit family, and now your LO has an anecdote to share about what NOT to do that involves you running around Seoul at 4 am local time trying to find a copy shop that is open. So you disclose them all to underwriting, and close concurrently, with the same lender, same underwriter, same funder, etc, so that the relevant parties all have their eyes on the Big Picture of what you are doing, and of course the firm must allow this which not all do.
Those are the big bullet points, and there are other caveats, but yes you can be in escrow for multiple properties at once, using Agency fannie/freddie financing. Many lenders have overlays prohibiting "rapid acquisition," but fannie/freddie themselves have no such prohibitions.
Investor · San Francisco, CA · Member since 2013 · 35 posts · 8 votes
9y
I know one option is to buy one in cash. While yes, that will get all of my cash to work, it does not allow me to gain leverage and lock in at these historically low interest rates.
Yup, you can close multiple escrows concurrently. Note that "concurrently" in this case means at the exact same time. So if you have 4 in contract, all 4 close at whatever time the slowest of the 4 would close by itself. Realistically, this can mean that you write offers with 60 day closes, get 2 tied up in contract, then over the course of the next month get two more tied up in contract with 30 day closes. Maybe a fifth one pops up with 3 weeks to go, but the lender already has all of your paperwork, so that one can be a 21 day close. In that simplified example, all would close 'on time' relative to the relevant individual contracts.
Alternatively, you can purchase using hard money and then when there will be a break in the purchasing, do a batch refinance with concurrent closings.
What you cannot do, unfortunately, is have staggered closings. Meaning that you have 3 escrows open at once, and they close a week or two weeks apart each. That's a no-no. Each time the LO, underwriter, and underwriting manager, get a ping saying "$400k in new debt appearing on credit report! Danger, Will Robinson!" -- that's an underwriting reset. Will screw your timing 3 ways from Sunday. Stack that with a last-minute trip to South Korea to visit family, and now your LO has an anecdote to share about what NOT to do that involves you running around Seoul at 4 am local time trying to find a copy shop that is open. So you disclose them all to underwriting, and close concurrently, with the same lender, same underwriter, same funder, etc, so that the relevant parties all have their eyes on the Big Picture of what you are doing, and of course the firm must allow this which not all do.
Those are the big bullet points, and there are other caveats, but yes you can be in escrow for multiple properties at once, using Agency fannie/freddie financing. Many lenders have overlays prohibiting "rapid acquisition," but fannie/freddie themselves have no such prohibitions.
You need a commercial line of credit. Where are you currently buying?
Thanks for chiming in Matt. I would rather use conventional just due to the better interest rate. What are the rates on commercial lines looking like right now? I am sure I will eventually get a commercial line but right now (I am just starting out) I want to max out conventional options.
@Chris Mason this is awesome, thank you. I will re-read this and digest it but I believe I understand what you mean. Thanks for your help.
Hi Ben,
Yup, no problem. Another strategy I have seen is to identify a BUNCH of properties you would be happy to have. Say, 10 of them. Write 10 offers. Suppose four offers get accepted. Then suppose one falls out due to something you don't like about the inspection results.
Great, close just on the three that you want.
Rinse, repeat, until at FNMA's cap of 10 financed properties.
@Chris Mason this is awesome, thank you. I will re-read this and digest it but I believe I understand what you mean. Thanks for your help.
Hi Ben,
Yup, no problem. Another strategy I have seen is to identify a BUNCH of properties you would be happy to have. Say, 10 of them. Write 10 offers. Suppose four offers get accepted. Then suppose one falls out due to something you don't like about the inspection results.
Great, close just on the three that you want.
Rinse, repeat, until at FNMA's cap of 10 financed properties.
Cool. Although it looks like I will hit my preapproval limit first, due to my W2 income level, before I hit the 10 properties level. The lender says that my income from properties does not count as income until after 2 years.
Rental Property Investor · Grand Rapids, MI · Member since 2016 · 262 posts · 205 votes
9y
I am having the same problem. Conventional is way too slow! Plus, the debt to income will reach the max before I can use up the loan allotment.
How do you get a business LOC when you're a new LLC business?
Investor · Los Angeles, CA · Member since 2016 · 41 posts · 27 votes
9y
@Ben Phillips For what its worth... In January I did a conventional 20% down deal. That took 5 weeks to close. Did a cash deal in March which took 10 days to close, then a more creative 5% down deal that took 3 1/2 months to close. That last one was a non stop blizzard of ridiculous hurdles that took the relentless efforts of myself and my agent to push through. While not always easy, paying cash will get it done quickly. Then you can refi out and use the cash for more. There's also the benefit of more than likely getting a preferred price. I'm going to be using this approach as best I can to grow my portfolio. I love leverage and using as little as possible, but the reality is you have to look at creative ways to accomplish your goals. Things will change. I'm going cash to build up my holdings, then at some point I'll be in a stronger position to leverage and use others money.
Investor · San Francisco, CA · Member since 2013 · 35 posts · 8 votes
9y
@Steve Karp sounds great. Sounds like you are doing maybe a little of the BRRR strategy. :) I unfortunately can't do that as I am buying turnkey so I am not putting in any value-add in my strategy. So financing it at the front seems to make sense for me, since they usually have already had the value added just before I buy.
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
9y
@Ben Phillips You should be able to buy commercial property in LLC's while still working on using all 10 of your conventional mortgages. The residential financing business is not geared towards the investor so there is no real way to speed up that process.
Real Estate Entrepreneur · Liberty Twp., OH · Member since 2016 · 37 posts · 22 votes
9y
Hi - yea conventional funding can certainly be frustrating and time consuming. If you are looking to buy multiple SFR's as investment properties, I would recommend a line of credit, private lenders that you utilize funds for a year, then get a refi through a conventional lender on appraised value, or buying utilizing owner financing on rental properties. Good luck!
Investor · West Bend, WI · Member since 2014 · 214 posts · 149 votes
9y
I have an LLC that is two years old. I also have a commercial line of credit.
I actually didn't ask for it, my bank offered it to me. I was converting both my conventional loans to commercial at the time tough. By the way the closing costs are WAY less on the commercial side. For me its about $250-500 per property ALL IN
Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
9y
recently I was in the process of closing 3 properties at the same time. It was a freaking nightmare.
the banks needed info from each other, I needed to give future rent schedules, insurance companies got mixed up. Everyone was getting my mailing addresses wrong.
Just make sure if you want to close simultaneously that you explain to the bank your intentions. Your DTI is going to be the main concern considering you're taking on 5 mortgages at once and more often than not, any future rent payments won't be considered until after you report them in your taxes.
San Francisco, CA · Member since 2015 · 21 posts · 12 votes
9y
Hi @Ben Phillips, I'm currently closing on two properties at once with the same lender using conventional financing. I found two properties that had roughly the same timing, and the lender was willing to close both on the same day. Not sure how many you want to do at once but I think it is possible if you shop around lenders.
I think it depends on your lender. I've recently been using a bank that is ok with financing 2-3 properties at the same time for conventional 30-year fixed loans. I'm not sure if they will be willing to go above that number. PM me if you want their contact info.
recently I was in the process of closing 3 properties at the same time. It was a freaking nightmare.
the banks needed info from each other, I needed to give future rent schedules, insurance companies got mixed up. Everyone was getting my mailing addresses wrong.