All Forum Posts by: Alan Pederson

I came across this information when I was doing some research on the internet. It might help..

HOW TO GET AROUND THE 10 FINANCED PROPERTIES RULE

I work with many investors and have came up with a game plan that works well for someone that is buying and building a portfolio of rentals. The game plan revolves around how to continue getting Fannie Mae loans once you have hit the 10 financed properties limit. I had a conversation with underwriting with my company and was given the actual Fannie Mae guideline on this and what is acceptable versus what wont work.

In a nutshell, here is the answer. Fannie Mae views a LLC differently than a SUB S or a C Corp as far as holding and financing properties. If you own more than 25% of an LLC and even if you went and got commercial / portfolio financing on the properties in the name of the LLC , they would still count in Fannie Mae's 10 financed property rule.

However if you hold them in an SUB S or a C Corp and you get commercial or portfolio financing in the name of the company, even if you have to sign a personal guarantee on the loans, Fannie Mae will not count those properties in the 10 financed property rule. Why, because they are commercial and the loan is in the name of the company. An LLC tends to be a pass through entity, so its structured differently.

So with that said, I would plan to buy the properties and hold them in your personal name. When you get to property number 9 or 10, then think about moving the property that you have the lowest balance on, or the most equity to a SUB S or C Corp. Then go secure commercial or portfolio refinance on those 1 or 2. By doing this, you will open up 1-2 slots available for Fannie Mae purchases going forward. Rinse & repeat to as many properties as you could ever want to buy.

Fannie Mae has the best overall loan terms compared to all other loans, so that is the reason that you want to always buy using Fannie Mae.

You need someone on your team that knows the needs of investors and the challenges that they face. The more someone knows about how to structure a deal, the more options they can give you and the more headaches and money they will save you.

First house was SFR 3-2-2 1320 sf we paid $123k for in 2015 now worth $165k. 20% down and $3k in rehab. $750 total payment and it rents for $1250. 30 year fixed financing on conventional loan.

I had no experience when I started managing it but have learned tons and tons in a few short years.

We currently have 3 rent houses and we are about 6 months away from purchasing the next.

I don't do cash. Money order, cashier's check, or epayment. But yeah, you're probably screwed on this one unless you have a camera in your store.

You can't get a loan without a job or other way to pay it back. Period!

I wouldn't lend a penny to a friend or family member that wasn't out there busting their back side off trying to get ahead. My nephew bought a new car and it got repo'd. He didn't have the money to get it back so he bought another car (only a few years old) from a tote the note lot and it got repo'd. Again, he couldn't afford to get it out. He called and wanted to borrow money from me and I said no. I told him you keep making bad decisions and I'm not throwing my money away. He had some money saved so I told him to go buy a crappy used car for maybe $2,000 and pay it off before even thinking about getting something better. He didn't listen and now has a used car he pays $150 a week for. His credit is still really bad and he still has the same job that barely pays enough for him to get by. Nothing has changed in the past couple of years.

Make better decisions and you get better outcomes.

My first car was a '68 Ford LTD back in 1981 that I paid $500 for. I made $4.50 an hour back then. It didn't have A/C. Imagine driving that in the Texas heat? I mounted a small fan on the dash and sweat a lot.

I did just the opposite of my nephew when I was his age. I worked and put in all the overtime I could. I drove a beat up old car and did most of the repairs myself. I saved money and paid cash for almost everything. I got a secured credit card and charged a few hundred on it at a time and then paid it off to build up credit. I cut my grocery bill down as much as possible and didn't go out to eat but maybe once or twice a month. I put myself on a strict budget and if I didn't have the money, I had to find ways to have fun that didn't cost anything (having friends over for game night, going to the park, renting a video, etc). Eventually built up enough money to get a better used car ('74 Orange Chevy Vega i bought from my sister in 1986) and went to college part time. Got a better job, was able to save more, able to have a little more fun, etc... It just takes time and a lot of hard work and discipline but it can be done.

Read the book Set For Life

-I would continue to put the 20% in the Roth to get the employer match.

-You're going to need 20% down plus enough to cover 6 months payments for any investment loans you might get. You might be able to get away with less if this is your primary home. It's a pretty big leap going from living with parents and no bills to buying a multifamily unit. A duplex might be a good idea. Live in one side with a roommate and rent the other side.

-Save what you can and work some overtime if you're able so you can save more.

-You could look for a money market account that pays better interest than a regular savings account

Good luck.

I don't think I would have prorated any days. You let them move in early without charging them and you promptly fixed the HVAC within 24 hours. The fact that there are a couple of holes in the walls may not look good but how would that not allow the renter to use that space? If they couldn't use that space or those holes posed a physical hazard that would be an issue.

I agree with some of the posts above. Address the noise complaints. I would bet that no one that lives in a 1 bedroom would think that they would have a neighbor that has 4 young kids staying there even if it is their grandma and only every other weekend.. That part is irrelevant. The people saying it's wrong to get rid of grandma aren't the ones living next to her.

I'm dealing with the same issue. Property taxes on one house are going to raise my house payment by $300 a month. Lets get the torches and pitchforks ready.

The same tenant that wanted to cut a hole in my wall that I mentioned above, asked me a month ago to put in attic insulation. Initially I was thinking no but they told me that their electric bill was over $200 every month. I had a hard time believing that insulation was the cure but I knew the AC was only 2 years old and they had really good double pane double hung window so I was open to the idea of putting in more insulation. I have another rental that is the same exact size and builder and is 2 blocks away. They only pay about $125 a month for electric. I told them that their bill shouldn't be that high and I would look into how much it would cost to add more insulation. It was only going to cost me a couple hundred dollars to buy insulation and rent the machine to blow it in. I told him if he helped me I would set up a time to do it before it got hot in Texas. He agreed to help and we got it done. He told me their bill is now around $100 a month. Once I got into the attic I realized that some places had no insulation at all. You could see the bare sheetrock. When I got done it was close to a foot deep.