The “third house slump” might sound silly to many people yet many investors know that many banks and other traditional lending agencies begin to balk when the talk of purchasing any residential investment properties past the 3rd house. There are a number of reasons that banks and other lending agencies feel this way, however, as an investor you personally know you want a lot more than just a few properties to rent ou, considering you want to make your business lucrative as possible.
So, what is a residential real estate investor to do?
Fear not, there are ways around this “third house slump” as they call it. The following are 5 ways that you as an investor can get past that slump and continue to invest in properties and grow your business:
Get Approval From a Variety of Lenders:
This may sound ridiculous at first, however, most lending companies will limit an investor at borrowing money for mortgages on 3 to 4 properties at the most. However, the good news is that there are a few lenders that are known as “investor friendly” and they may be willing to give you loans for more mortgages – up to 10 to be exact.
So, that’s a great start! Using some of these “investor friendly” lending companies can help you get started with up to 10 properties (the limit allowed by law) to rent out to potential tenants. These “investor friendly banks” are not the big names you know such as Wells Fargo or Chase but are rather smaller, more local lenders who are most likely not doing business nationwide. Some research will have to be conducted to find some smaller “investor friendly” banks and lending agencies in your area but they are out there and you can find them.
Consider Blanket Mortgages:
Blanket mortgages cover mortgages for multiple properties in the same loan. Consider getting a loan that may cover more than one property. That way you have fewer loans yet more properties to rent out under those loans, especially since many commercial banks will limit you to a few (maybe up to 10) mortgages being taken out at any one given time. This way you get more properties to invest in out of the deal without needing individual mortgages for each one.
Consider Private Lenders:
Sometimes private lenders may not have the big, impressive name of a Wells Fargo or Chase but these smaller lenders can make great alternatives to borrowing more money when you want to acquire more properties to grow your investments. This may require some research on your part, however, talking to other investors in your area may help you find other private lenders that you never even knew about as well.
Pay Off Some of the Properties You Have Current Mortgages On:
Paying off some properties that you already have a mortgage on is another great option you have as an investor. Once some of the mortgages are paid up, you open up more capital to spend on new properties as you will have fewer expenses once the mortgages on your existing homes are already paid off. Then you will be able to get mortgage loans out for a new property, even if it’s from a private or specialized lender.
Save Up To Pay Cash:
If you are a fairly large investor that generates $10,000’s or more of revenue per month, consider saving up cash to pay outright for properties. That way there is no mortgage company or loan required. If you can acquire properties for cash, the sky is the limit on how many properties you can own. This process may take longer to acquire each property but the trade-off of owning them 100% and not owing on a mortgage can make it worth it.
These are just some of the ways that you can invest in more properties so that you have more residences to rent out and more chances to bring in money and grow your business. It may take some strategic planning on your part and possibly even a partnership with someone else who has experience in the industry to get things off the ground. However, one you get the first few properties in and are making a good quantity of money, saving to invest in more properties will help you grow your investment further.