How to break the 4 Rentals Ceiling

[Brian Marshall]

Hi Everyone,

Looking for advice on how to get multiple rental properties. Some banks say after 4 properties, the requirement is 25% down plus a reserve of 6 months mortgage payments for all properties.  I hear on the bigger pockets podcasts people get 20, 30, 100+ properties. Any advice? Thanks.

[Andrew Postell]

@Brian Marshall yes, absolutely find another lender.  And you don't have to seek out a portfolio lender...at least not yet.  What you are dealing with are "overlays".  Overlays are the rules that banks put on top of conventional lending to be less risky.  It sounds a little strange but some banks don't want to lend on every deal.  So us as investors look for banks with no overlays...or very little overlays.  That way you find the most flexible lending you can find.

"Conventional" loans do allow you to buy up to 10 properties with a mortgage (and in some circumstances beyond).  Conventional loans are the loans that are governed by Fannie Mae and Freddie Mac.  They give the best terms, lowest rates, etc.  Their minimum down payment is 15% at first.  The reason why you heard about those specific requirements in your first post are the overlays that the bank has put on top of Fannie/Freddie loans.  I would guess that it was a "larger" bank that you spoke with.  That's why you hear investors speak about finding a smaller bank.  Or perhaps a regional bank.  Those are the banks that have the fewest overlays.  Also look for a bank that is NOT traded on the stock market.  It might take some calling around but you can absolutely find a lender that will give you more flexible terms.  It might even be a good idea to speak with some other investors in your area to see what banks they use.  Hope this helps!