@Kris Mann thanks for the response! That certainly helps build my confidence in the answer moving forward!
@Randall Alanfollowing up as requested!
TLDR: Dependent upon the specific lender and interpretation of Under writer. Ex: local community portfolio lender responded directly to me via email, "If you are a 25% or greater owner in LLC you have to sign a PG on our loans. Keep in mind, our loans that are closed under an LLC with Tax ID number we do not report to credit even though you sign a PG"
Another email from my conventional lender: "If the loans are refinanced through a commercial loan either individual or blanket and they are paid off with current lenders on your credit report then the answer is yes you should open up the availability to add more."
Here is my research along with conversations with lenders:
Strategies for > 10 Properties
https://www.biggerpockets.com/member-blogs/4658/46453-hitting-your-10-financed-properties-limit-with-fannie-mae
- transfer, buy, or own your properties in entities such as LP, LLC's, or partnerships where your ownership is less than 25% since any property with financing only counts against this 10 count if your ownership in these partnership style entities only counts when your ownership is at 25% or greater
- Use a spouse whom you trust who can keep or own 10 financed properties in their name and 10 in your own name
- Use commercial and or portfolio financing from local banks once you hit 10+ financed properties so you can acquire additional financed properties and allow you to continue to grow your portfolio
https://www.biggerpockets.com/forums/311/topics/586760-how-are-people-getting-more-than-10-loans
You need to find a reputable portfolio lender. The amount of financed properties will not factor into approval. If the properties are located in the sate that you will I would recommend trying a local community bank first. If out of state a national portfolio lender. Local community banks in my area typically lend 3-5 year balloon -20 year amortization in the 5.5 - 6% range. National portfolio lender may offer 30 year fixed in the 6.5- 8% range depending on credit and LTV.
Get 10 loans and then seek out a commercial lender and have them do an umbrella loan for the entire portfolio. The existing loans will all be paid off and you'll have 1 loan with that commercial lender. Now you can start all over from scratch and start accumulating your 10.
https://www.biggerpockets.com/forums/50/topics/254965-financing-more-than-10-properties
I just went through this very question with my underwriting staff and there are some interesting answers that came up. According to Fannie Mae, if you own more than 25% of an LLC that the properties are financed via a portfolio loan on, you must still count the properties in the 10 financed property rules. However if you own 25% or less, then you don't have to count the properties that are in the portfolio loan so long as the financing is in the name of the LLC.
Here is were it gets interesting, if you have the homes in a Corporation or a Sub S Corp and the portfolio financing is in the name of the corp / Sub S, then you don't have to count them into the 10 financed property rule, even if you are sole owner of the corporation?.
To get around the issue mentioned by Kevin Guild, make sure that you "control everything, own nothing". That gets you around the ownership considerations for the LLCs, since none of your business entities are owned by a human person.
Beyond amazing @Stephanie P. provided:
The rule is 10 properties financed that you're personally liable for, but if you refinance them into a commercial loan, then your entity and not you are responsible freeing you up for more loans. I've attached the Fannie seller's guide for your review. https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B2-Eligibility/Chapter-B2-2-Borrower-Eligibility/1736858041/B2-2-03-Multiple-Financed-Properties-for-the-Same-Borrower-08-07-2019.htm#Limits.20on.20the.20Number.20of.20Financed.20Properties
The first couple of paragraghs are key as well because they define the criteria for number of financed properties. I bolded and underlined the key phrase that exempts liabilities when they're in an LLC. The regulation reads:
"The number of financed properties calculation includes:
- the number of one- to four-unit residential properties where the borrower is personally obligated on the mortgage(s), even if the monthly housing expense is excluded from the borrower's DTI in accordance with B3-6-05, Monthly Debt Obligations"
So if the properties are financed through an LLC and you're not personally obligated, they are not counted. Don't put them on the 1003 (Application) in the real estate owned section because you don't own them, the LLC does and they won't be counted by DU (Desktop Underwriter).
