Loans, loans, and more loans

What do you do when you go to purchase one property and you end up with two?

When the opportunity presented itself to start a real estate investment company with my business partner, we never in a million years thought that we would be able to purchase two homes, meeting our criteria, to start off our venture.

Well, life can throw you a curve ball or two ...

I'll leave the story for another day, but while negotiating for our purchase, we ended up with a second property for a reasonable price, all the while, never going above our last/final budget.

That brings me to the question - what to do next?

As investors, we are all concerned with how to carry the minimum number of mortgages on our credit, while maximizing the number of properties that are generating income.

Well, there are two ways that I have found to make this happen.  I am NOT an expert in this industry.  I am neither a lawyer or banker, and don't claim that this information is 100% accurate.  Please do your own research.

Option 1

Purchase directly into an LLC.  By purchasing directly into the LLC, the loan becomes the "problem" of the LLC, and not of the individual.  Loans like this is do not affect your personal debt to income ratio.  These loans can be more expensive to close, and sometimes take longer to close. As a member of the LLC, you become a "guarantor" of the loan, not the principle.

Option 2

Option 2 can be blended with Option 1, the principle is mainly that instead of having a loan on each property, you find a bank that will write a portfolio or blanket mortgage.  This will be one mortgage for all of the properties that you are purchasing.  Similar to Option 1, this loan can be more expensive and take longer to close.  The benefit is that if you are holding your loans personally, you'll go down to having ONE mortgage against your credit.  Please be advised, most of these mortgages are NOT 30 yr fixed.  You usually get 3-5 years.  Some investors are comfortable with this situation, others are not.  Hopefully, by using a single portfolio loan you'll actually be able to pay down the principal faster, with all the money you saved!!  

I hope to write more on this topic in the months to come.  I have successfully closed one portfolio loan and I am thrilled.