Loan Strategy

[Tyler M]

Hello, I hope everyone is doing well. I was trying to help my parents invest in RE and was wondering what the best strategy would be for getting loans and using leverage.
I heard that you can get a maximum of ten loans for each person but the first five you only have to put down 20% but for the next five you may have to put down close to 30% and maybe the interest rates won't be as good.
My mom has a 780 credit score I don't think my dads is as good I think it is about 700. How can they obtain the maximum amount of loans? They have enough money for down payments on about 20 houses combined if each house sells for 75k. Is it important that each person applies separately to get the maximum of 10 loans each or can they apply for each conventional loan together and put both their names on each mortgage and still get 20 loans combined?

Thank you for any info.

[Jon Holdman]

Downpayments on rental properties are generally 25% for the first four mortgaged properties and then 30% after that up to ten. Finding a lender for the 5-10 properties can be challenging. They will also need cash reserves. For 1-4 its six months PITIA (A = anything else like an HOA) for the subject property and two months for all others. Once you get past four, you needs six months for all properties.

Yes, they will need to apply independently if they want to get to 20 conforming loans.

There are other programs out there, though. There are banks still doing commercial (i.e., non-conforming) investor RE loans. The terms is probably shorter, 15 years max. But this is an option if dealing with all the ins and outs of conforming loans is a problem.

The kicker is going to be income. To get a loan the applicant will need to have enough income to cover the payments. You say they're retired. But they must have income from somewhere. Initially, they're going to need to use some other income to cover the payments on the property.

Also, since they are retired, need the cash flow from these properties, and don't have room for big mistakes, be sure you and they learn about the realities of rental property. Cash flow is NOT rent - PITI(A). Banks will calculate "net rental income" as rent * 75% less the PITI payment. That may still be a little optimistic if they're going to hire a property manager. If they're managing the properties themselves, it probably close.