How do you buy multiple houses a year?

Question

I already own 1 property...my 1st house. I will be renting it out soon. If all goes well I'd like to continue to buy more homes, but I'm confused as to how people buy multiple properties a year.

Do you have a business and buy them that way? Or do you do it personal with your personal credit score?

I have darn near perfect credit but dont want it to slide by buying a bunch of properties.

I also dont want to just start a business without knowing if this is something I'm cut out for.

So how do people do this?

Herndon Davis · Answer

It's done 1 of 3 ways.1- All Cash sales. Not many people have the funds so this isn't feasible for most.2-Buy multiple properties through Conventional Lending (Fannie Mae/Freddie Mac) type of Conventional loans, which I don't recommend. Although you get the best rates, they count and recalculate your overall personal debt ratio each time, making it harder to qualify; they use personal income and tax returns as part of the approval process, you can't use all of your rental income to qualify for the next loan. You can't buy in a company's or a Trust name to protect you from liability and lawsuits; you can't combine all your different mortgage payments into one Portfolio Loan; and you're capped at 6 and 10 properties depending your program.  But despite all the drawbacks, many people still do it.3-Use Non-QM (Non-Qualified Mortgage) products AND use BUSINESS CREDIT to supply the down payment.  First with your near perfect credit score you can enroll in a program which can get you 5 or 6 business credit cards, which you are the personal guarantor.  You can advance the entire amount and pay back the minimum each month often o% interest 6 months to a year.  You then just transfer the funds to another card and start the process all over again.  Use the advance funds as down payment using a Non-QM loan.The advantages of Non-QM loan would be that you can buy in a company or Trust name to protect you from liability, you don't have to submit any pay stubs, tax returns; they don't calculate your personal debt ratio; approval is made primarily on the asset's ability to generate income; you can combine all mortgage payments into ONE simple payment; you're never capped at how many properties you can own and often there's no Seasoning and Sourcing of Down Payment.  In other words, they don't ask where it came from and how long you've add it (most don't at least). The drawback is that these loans are more expensive requiring 20% down payments; costing upfront 1-2 points maybe more; and slightly higher interest rates than conventional mortgages.  In my opinion its worth it if you plan on doing this full time or at least draw a significant amount of income from it.There you have it.  I'll PM you if you want to discuss further!

Johnny D. · Answer

I've maxed out my conventional loans, but when I had access to them, I was in a similar starting position as you based on the information given. As long as you always pay your bills on time, your credit score will decrease some at first but should still stay high enough to qualify for the best rates and terms with most lenders.

For me, I could care less if my credit score is 730 or 830 as most lenders give the best terms if you have a 720 or above...although I have noticed some giving slightly better terms for 760s and above.

If you choose to do the traditional route of saving up for buy-and-hold properties in the beginning (this is what I did), all you really need to do is buy in your personal name and save up for the next down-payment while having enough reserves should something major breaks. The question then becomes how soon you can save up for your next down payment.

If you purchase enough properties this way, you should eventually build enough equity where you can either sell some properties or do cash-out refinances to free up enough capital to start doing BRRRR deals. This is definitely where better growth happens, and it is a good time to start looking at getting properties out of your name and in an LLC.

As to buying multiple properties in a year, this depends on how much income you are generating from a W2 job, other investments, or a combination of both. Most people buying multiple properties a year the traditional buy-and-hold route have built up enough capital to allow this. It takes more time if you don't have a strong starting point. It also helps if you are buying within a market with access to more affordable homes.

Emily Hill · Answer

Account Closed Hi Toria! Great question, I am in the same boat as you, kind of. I have a primary residence here in CA and just purchased my first rental property in MO. I’d like to kickstart my RE career and buy multiple homes as well.

@Herndon Davis Hi Herndon! Wow, great info! I’ve never thought of using business credit I will have to explore this topic some more.

Kerry Baird · Answer

I’ve done all three strategies mentioned above...owner occupied + kept moving, purchased with conventional mortgages, and have used non-qm loans. Have also used portfolio money, hard money, and have purchased with owner financing.

Bill B. · Answer

I bought 10 in 5 years by buying a new primary every year for the Better rates and terms and also one - 2 rentals per year. This was seriously slow and steady compared to today’s pace you see investors grow. Ain’t looking to be biggest or fastest.

Demetrius Potts · Answer

So how does one get a pre-approval letter for Non-GM loan that uses rental income as proof of affordability considering sellers won’t show you rent roll unless you show them your letter and or go under contract?

Michael Henry · Answer

@Toria Pose

You purchase as many as you can under your Perosnal credit to get the best rates once your DTI is maxed out u switch to private / commercial financing through an LLC. Some people purchase 4 unit builds and refer to that as 4 properties, it’s truly one property with 4 doors.

Previous replays were spot on if money becomes an issue you can utilize business credit for down payments and repay with your rental income.

How do you buy multiple houses a year?

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