Purchasing several low income homes.

[Granville L.]

I have a job that provides more for my family then it takes us to live. My wife and I invest in real estate for our future. I would rather put down the initial payment and have someone else pay off the asset. We purchase homes and role all the profit into the principal. We do not take any money out of the monthly profit. We have purchased several homes from high to low income areas. We have found that we make more money in the low income areas the taxes are less. We are purchasing several homes from $30,000 to $46,000 right now with a commercial loan at 5% interest for a 5 year fix with putting 20% down. Although it is a balloon loan, we role all the profit in the home and should have it paid off in several years. I understand that a ballooning note needs to be watched closely and paid off before it matures, but with rolling all the profit into the payment, I figure the home will be paid off before the loan matures.

Here in Texas, we can only qualify for 3 conventional homes. Once you have 3 rental loans and 1 personal (home loan) the banks will not allow you anymore. So, it seems commercial is the only way to go.

I would really like to know your professional opinions on these loans, and the way my wife and I run our business. I say business because in the next few years I plan on owning 40 homes.