Most banks will finance rental properties, but you want to work with a bank that best aligns with your real estate investment goals. If you plan on mortgaging more than 4 rental properties, then you want to work with a portfolio lender as opposed to a lender who sells their loans on the secondary mortgage market (I’ll explain portfolio lending later).
A lot of banks, especially the big national lenders typically sell their mortgage loans, and the biggest buyer of mortgage loans on the secondary mortgage market is Fannie Mae. Fannie who? Fannie Mae. Also known as (FNMA) or officially as The Federal National Mortgage Association. Fannie Mae was established by Congress in 1938 to help stimulate the housing market.
When banks sell loans to Fannie Mae they must abide by Fannie Mae’s underwriting guidelines. Up until 2009, Fannie Mae put a cap of 4 properties financed by a single person. In 2009, Fannie Mae increased this limit to 10, but even with this change, many banks will not offer financing to investors with more than 4 mortgages. Why? Likely because of all the underwriting work required.
How To Finance More than 4 properties
Now, if you’re just looking to pick up a couple properties, than this whole Fannie Mae limit probably won’t concern you, but if you’re goals are ambitious, then you’ll have to circumvent Fannie Mae. My business partner and I purchased 35 properties in a year and a half and mortgaged every one of them. How did we do it? We worked with portfolio lenders. Check out my post “What Is A Portfolio Lender?”.
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