I Can’t Get Any More Loans. How Do I Continue To Build My Portfolio Of Homes?
Question: I Can’t Get Any More Loans. How Do I Continue To Build My Portfolio Of Homes?
Dear Joe, I own a 17 rental houses. I don’t manage them myself, so they are wonderful passive income generators. What you say about owning property is absolutely right. They are paying themselves off and slowly making me rich. They will all be paid off in the next 8 years and I’m going to be able to retire with about $20k a month when they do. Wahoo! I would encourage all of your other students to build their portfolio the same way. BUT – here is my problem – I’ve used my good credit to buy these properties and have had to put money down whenever I bought a house. Unfortunately, Fannie Mae only allows you to get 10 non-owner occupied loans. I used those up and then went to non-conforming loans. I was able to get 7 more with a little higher interest rate. But I’m approaching 20 mortgages now and they are going to shut me off – even though my properties cash flow. I would like to keep buying property – I’d like to own 40 or 50 houses when I’m done. Do you have any good sources of loans for someone in my situation?
Matt in Allentown, PN
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Read Transcript for “I Can’t Get Any More Loans. How Do I Continue To Build My Portfolio Of Homes?”
Having a hard time getting new loans on your rental properties? Here’s some ways you can continue to build your portfolio and come out on top.
“I own 17 rental houses. I don’t manage them myself, so they’re wonderful passive income generators. What you say about owning property is absolutely right. They’re paying themselves off and slowly making me rich. They will all be paid off in the next eight years and I will be able to retire with about $20,000 a month when they do (wahoo!) I would encourage all of your other students to build their portfolio the same way. But, here is my problem: I’ve used my good credit to buy these properties and have had to put money down whenever I’ve bought a house. Unfortunately, Fannie Mae only allows you to get 10 non owner occupied loans. I used those up and then went to non-conforming loans. I was able to get 7 more with a little higher interest rate, but I’m approaching 20 mortgages now and they’re going to cut me off, even though my property is cash flow. I would like to keep buying property and I’d like to own 40 or 50 houses when I’m done. Do you have any good sources of loans for someone who is in my situation?” – Matt in Allentown, Pennsylvania.
Joe: Matt, the mortgage industry, as I’m sure you’re already aware, has changed dramatically. I’ve sold lots of investment properties to investors across the country. We’d buy up subdivisions and then sell off houses to investors who would hold them for rentals for the long term.
Joe: These were good properties. These weren’t properties like $300,000 and $400,000 condos that made $1,200 a month. These were properties in the $100,000 to $200,000 price range that could get very close to break-even on their rent, so even if the market declines, you still have your rent covering it and you’re not going to have to worry about appreciation.
Joe: A lot of the other types of new construction deals and rental property deals that people have bought in the last five or ten years have been based entirely on appreciation, and we did it so that it would be based on income – we want the income to be able to cover the debt service on the loan so that they can pay themselves off over time. There are so many different ways to monetize that.
Joe: Let me give you a free audio that you can listen to. It’s about an hour or an hour and a half long and it talks about long term passive investments and borrowing money to do it. It’s at JoeCrump.com/longterm. Go to that website. There is a free audio there that you can listen to that explains how passive investments work and the way that we were doing it when selling to investors.
Joe: But you’re in a situation now where you’re probably not going to be able to get new loans unless you get cosigners, so the best way for you to do it is to modify the way you buy the properties and switch over to buying them with the zero down techniques, i.e. use the “Subject-To”, the “Millionaire Matrix”, the land contracts, etc.
Joe: There’s also a hierarchy, so you need to understand the hierarchy of structures. “Subject-To” is the best way to take a property because you’re getting the deed to the property and that gives you a lot of control and makes it possible for you to do it any way you like.
Joe: It’s okay to buy properties on a lease option but lease option doesn’t put you into very strong control of the property, so I don’t buy on lease options; I’d much rather sell on a lease option. You buy with the strongest position. You sell to the weakest position so that it’s easier to get the property back if the person who’s buying from you defaults. So, if you bought it on “Subject-To” and sold it on a lease option to an end user perhaps, you’re going to get top dollar for it when you sell it on those terms. You’re going to get a lease option up front, and then there’s a possibility that they’ll stop making their payments or they won’t exercise their option and you’ll have to take it back from them and then sell it again.
Joe: You’ll want to look at these as long term investments that you’re going to keep in the long term. There’s also about a 30% possibility that they’ll actually exercise their option, and if they do exercise their option, then you’re going to make a profit.
Joe: So, I’m going to suggest that you buy properties on “Subject-To”, as I explain in the “Millionaire Matrix”. Buy it that way and get the deed, then turn around and either rent those properties out for the long term like you’re doing with your other properties, or sell them on a lease option.
Joe: I like selling on lease options because the lease option tenant takes care of the property, i.e. the furnace goes out and they’re required to replace it, etc. We have a lot of nice little things set up with lease options. We put them into the position of being an owner rather than just a tenant, so that way, we have to do some of the tenant issues, but mostly, they take care of the property.
Joe: Hopefully, that helps. This is a great way to buy property. You ought to switch over from what you’re doing and get on this immediately, because all of these other techniques, the FSBO’s, the expired’s, the “For Rent Method” – all of these are great ways to get lots of leads, and all you have to do is make this offer to them. You do need to understand how to put it together and how to talk to these people, but this isn’t rocket science – we’re doing this every single day. Good luck with it.