what to do after 10 properties?

Question

So I have finally hit the 10 property mark.  They each have a mortgage with a rate between 3.5% and 4.0%, so I don't want to refinance them into an umbrella loan or anything like that.  My question is, what is the best rate I can expect going forward with portfolio lenders.  I have excellent credit and my DTI is around 42.

I got one quote from a portfolio lender for 6.875 5/1 ARM, 30 year pay down.  Are there better rates out there?  What would be considered a "good" rate from a portfolio lender?  What about commercial loans on 5+ unit properties, would those come with better loan terms?

Nathan Click · Answer

@Gloria Mirza - Sounds like it is time for you to set up an LLC and move over to commercial financing.  Commercial rates are a higher than traditional mortgage rates but it is the best way to expand your portfolio as there is no limit to the number of properties you can have and there are lots of different types of loan products out their to fit whatever your strategy is.  I'd be happy to discuss.  Feel free to reach out to me.

Chris Mason · Answer

@Gloria Mirza, you can certainly do better than what you were quoted there, but yeah it's never going to be quite as good.

You can also do 10 in your name alone, 10 in the spouse's name alone. I've got a power couple sitting at the 16th property mark right now because we planned ahead and always got loans in the name of only one spouse.

You can also take the smallest mortgage balances and consolidate them into your property that has the most equity to free up a few slots. It's not a "10 property" limit, it's a 10 financed property limit.

On top of that, there are HELOCs and 2nd mortgages. Again, it's a 10 financed property limit. In theory if you have 50 mortgages on one property (just to be fanciful), that counts as only one financed property.

Ralph R. · Answer

@Gloria Mirza  I just got a commercial loan on a single family house in Colorado.  It is 4.65%, amortized over 25 years, with a balloon at 10 years.  25% down pmnt.  I know if I still own this one in 10 years I could have some bigger interest but the average house turn over is around 7 years.  I'll probably sell or re-fi before then.  Bottom line is there are better loans out there.  I found this one in about 3 hours of phone time.  (I live 3000 miles from my investment area.)  I had the offer in, it was accepted and I just started making phone calls.  I started with my bank in that city, and went from there.  one referral to the next.  Ended up being a small credit union in the same town but the loan underwriter is a lender 250 miles away in another town.

Pay attention to what Chris Mason is telling you.  He is good at what he does.

RR

Heather Easterbrook · Answer

Gloria,

You can get a 30/30 loan, 1-4 units, for around 5.5%. These loans are based on credit score & property cash flow. DTI is not a factor.

Commercial rates, for 5+ units, will be around 5%.

Loan min/max requirements, lending location, credit score, etc. vary by lender.

Hope this helps!

Heather

NMLS#1065757

David Zheng · Answer

I have 3 porfolios 7/1 Arms 30 years. rates around 4.875-5.0Credit Score is meh 720-740 but only because I've been mass financing homes lately.

Caroline Gerardo · Answer

Changing to a LLc is not going to move around the bank rule of 10 financed properties. That is a bank overlay rule to Fannie and Freddie.  You of course have to qualify with net IRS numbers 2019 2018 AND prove you have rents coming in since Covid february but conventional loans are available- depends on your FICO, property type, LTV etc for rates

Chris Mason · Answer

If you want to keep it clean and not worry about the underwriter hitting the non-borrowing spouse with the liability of the property taxes and homeowner's insurance (yup, on title means YOU are obligated to pay that, even if they are escrowed, etc), keep it totally separate. We're in a community property state, so in the event of divorce there's a REALLY good chance a court would treat it all as joint assets anyways.

And if you're worried about death, talk to an estate planning lawyer.

Parker Borofsky · Answer

@Brian Gerlach As long as you are not personally obligated on the financing, it is not counted as one of the 10.  The Freddie Mac language is a little more clear than Fannie, but they have the same requirement: (the reserves requirement for Freddie is different than Fannie)

Freddie Mac guideline:

Each Second Home or Investment Property Mortgage must meet the following requirements:• Each Borrower individually and all Borrowers collectively MUST NOT BE OBLIGATED ON (e.g., Notes, land contracts and/or any other debt or obligation) more than 10 (ten) 1-4 unit financed properties, including the subject property and the Borrower's Primary Residence, provided that, when the number of 1-4 unit financed properties (including the subject property and the Borrower's Primary Residence) is greater than6 (six), the Mortgage must:o have a minimum Indicator Score of 720 AND

o 8 months of the monthly payment amount on each additional second home and/or 1-4 unitInvestment Property that is financed and on which the borrower is obligated.

Brian G. · Answer

@Chris Mason I know this is a really old thread but got a question: for a married couple to get to 20 conventional loans by alternating mortgages, is it critical that they are each only on title for the properties that they purchase of can both of them be on title for all 20 properties? Thanks!

what to do after 10 properties?

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