How to mortgage multiple properties?

Question

Hi,

I am unclear on the issue of mortgaging multiple properties. I constantly see or read articles about people that invest in real estate and purchase multiple properties to rent. 90% of the time these people have regular jobs and are buying the properties will some cash down and mortgaging the rest. My question is how do they qualify to mortgage say 5-6 different properties? Doesn't it come to a point where the bank might say that you are overextended? Any help would be great. Thanks.

Answer 1

I hold over 20 mortgages, the banks don't care. Wells Fargo cut me off at 10, but can't effect my other accounts. You can not count rent from a home you are purchasing at the time, but you can from your other properties,

Almost all of my friends own at least 4-5 homes, it is not that hard. This is the time to buy too, there are some great deals.

Answer 2

Those ladies and gentlemen who place one mortgage on multiple properties, usually need financing for a larger project or purchase. This type mortgage is a “blanket mortgage“. It means exactly that. It covers more than one property. Sometimes legitimate lenders want a blanket mortgage to further secure the money they lend.

A “swing loan” is similar to a blanket mortgage. Many times people “get the hots” to buy another property. Rather than FIRST selling their present property AND having a very good idea of what they will have after settlement on that property, these folks “put the cart before the horse“: they buy the second property before the 1st property is sold or properly rented [which is another Yahoo! Answers]. The swing loan is paid for both properties - the one NOT sold or properly rented AND the second/new property. This IS NOT a good position to be in - NOT AT ALL.

Most investors prefer every property “stand on its own”. One property, one first mortgage on that property. If there are any other mortgages they have a second or third position. Very rarely are there more than 3 mortgages on a single property. There may be many liens, but rarely are there more than 3 mortgages.

Why? A lender in a 2nd or 3rd position is not as strong as the the lender in the 1st position. If a property owner - including an investor - defaults or doesn’t make the monthly payments to the lender in the second or third position, AND THAT LENDER WANTS TO FORECLOSE BECAUSE OF THE LACK OF PAYMENT: when the property goes to foreclosure the 1st mortgage must be paid for or “satisfied” first. THEN the bid continues until the amount reaches the sum of the first and 2nd mortgages, etc.

Every subsequent mortgage and lien holder must wait for the bid to get to the next highest bid AND add that amount to the bid price, before that lien holder can be paid. These subsequent mortgages and liens also effect the purchaser’s probability to get good title to the property.

Thank you for asking your question. I enjoyed taking the time to answer your question. You did a great job - not only for your information, but for every other person interested in reading my answer.

I wish you well!

VTY,
Ron B.

Answer 3

Buying Multiple Properties

Answer 4

This Site Might Help You.

RE:
How to mortgage multiple properties?
Hi,

I am unclear on the issue of mortgaging multiple properties. I constantly see or read articles about people that invest in real estate and purchase multiple properties to rent. 90% of the time these people have regular jobs and are buying the properties will some cash down and mortgaging the...

Answer 5

It sounds like you're asking how does the landlord/investor earn enough to pay for all of these mortgages. He earns it from the rent that is paid by the renters. If he was paying the mortgage on 5-6 houses just on his income at a "regular job", he'd never earn enough to cover the cost. It's possible that he may have a vacancy here or there, and he'll lose money for awhile until someone rents that apartment, but it's unlikely that ALL the properties will be vacant at the same time. He hopes so, any way...

Answer 6

Over a 21+ year military career I purchased several homes and hung on to them as I moved from one duty station to the next. By the time I retired I had amassed a very nice portfolio of rental properties. If the properties are all rented and show a positive cash flow the income and mortgage payments are generally viewed as a wash by most mortgage lenders. They didn't help with my debt to income ratio, but they didn't hurt it either.

Answer 7

The banks will let you count 75% of the rent from a property you own (need one year lease). In most cases this covers the mortgage payment and allows a borrower to purchase another home based on his "regular job" income.

Answer 8

It is for individuals having a hard time with one loan, not for someone that has a business of buying and renting multiple properties. I see no way for you to get any help through them. Sorry.

Answer 9

They have absolutely stellar credit ratings and a history with the company they usually go to for the loans.

They have regular income in addition to rental income and the bank bases lending more money based on these facts plus remember I said STELLAR credit ratings.

Answer 10

Interesting thread!