Creating a rental business out of investment properties is a lucrative approach many people pursue. Building a rental program from investment properties requires much thought and analysis, especially when it comes to financing and management. The average investor owns four our more properties. The following are a few options to consider when applying for more than one loan:
- Fannie Mae’s 5-10 property mortgage: This option will allow you to finance up to 10 properties. A minimum of a 720 credit score is needed in order to qualify. According to MortgageReports.com, each property must be attached with financing, and a 25% down payment is required for a one-unit purchase, and 30% down payment for a two- to four-unit purchase. Further requirements can be reviewed by using this Fannie Mae multiple property checklist, which will help determine your qualifications.
- A blanket mortgage: Make one loan payment for all your investment properties with a set rate and terms. In this case, there is a release clause, which allows you to use gains from selling one of the rental properties that is part of the loan. Profits from selling do not need to be directly applied to pay back the mortgage. Although, if payments are insufficient towards the loan, lenders have the right to try and deem the properties under the mortgage as theirs. In addition, blanket loans require certain prepayments and strict qualifications.
- Portfolio loans: While portfolio loans may allow you to invest in more than four properties, lenders can offer more options to borrowers who may not meet the criteria for conventional loans. Borrowers may not be asked to prove income with portfolio loans, but it is still likely that rates will be higher, and that prepayment fees will be required. Portfolio loan lenders may even allow a borrower to invest in more than ten properties. The loans remain in the lender’s investment portfolio and are not sold to other investors.
- Freddie Mac Investment Property Mortgage program: Finance a maximum of six 1-4 unit properties, plus your own home. Freddiemac.com features a guide to help verify if you meet the criteria for this option.
To begin an investment business of owning and managing multiple rental properties it is a vital first step to speak to experts in the field, including: Experienced realtors, local property management companies, and a loan specialist at A&D Mortgage to discuss your vision, qualifications, and opportunities.