If you are looking to finance real estate, portfolio lending may be the way to go. One of the reasons for this is portfolio lending is not restricted to the new 4 property rule. With a portfolio lender, it is possible to finance an unlimited number of mortgages. However, those looking to get loans through conventional lenders such as Fannie Mae and Freddie Mac will run into the 4 property rule.
Obviously new lending rules were needed to curb the losses of hundreds of lenders that are now out of business. But, in my opinion, the 4 property rule is ridiculous. In fact, this rule borders on Socialism. The 4 property rule severely hinders the ability of a real estate investor to continue doing business.
Wondering what the 4 property rule actually is? Fannie Mae and Freddie Mac announced in 2008 that the maximum number of financed properties a person can have is four. This crazy rule even includes a person's primary residence so really the maximum number of rentals is limited to three.
Specifically, if you are still financing your primary residence, you can only flip three properties if they are currently being financed! Again, this type of rule does very little for aiding investment circles. Really, it is a form of protectionism. And, as history shows, protectionism has the inverse consequence of what it was originally intended. That is to say, it does nothing to help the market and overall economy. Instead, the 4 property rule can significantly weaken the economy.
Prior to the mortgage meltdown, most real estate investors took advantage of astronomical appreciation. They practiced what all good investors practice: buy low/sell high. Most investors were buying everything they could and mortgages were easy to come by. Some bought to flip, some held in their own rental portfolio and some bought properties in bulk. All of those activities pumped a lot of money into the economy.
If there were no 4 property rule, the sale of of real estate would lead to a number of positive effects. For example, the revenues generated would lead to increased liquidity. It would also generate significant tax revenue to the state and local governments. And, of course, affordable housing would be plentiful. With this 4 property rule, none of this is possible. Hopefully, this rule will be overturned so we can return to a free market approach to investment real estate.
The good news is, regardless of whether or not this rule is revoked, portfolio lenders do not have to follow this 4 property rule. If you have more than 4 financed properties (or hope to), a portfolio lender is what you need. - 16752
Obviously new lending rules were needed to curb the losses of hundreds of lenders that are now out of business. But, in my opinion, the 4 property rule is ridiculous. In fact, this rule borders on Socialism. The 4 property rule severely hinders the ability of a real estate investor to continue doing business.
Wondering what the 4 property rule actually is? Fannie Mae and Freddie Mac announced in 2008 that the maximum number of financed properties a person can have is four. This crazy rule even includes a person's primary residence so really the maximum number of rentals is limited to three.
Specifically, if you are still financing your primary residence, you can only flip three properties if they are currently being financed! Again, this type of rule does very little for aiding investment circles. Really, it is a form of protectionism. And, as history shows, protectionism has the inverse consequence of what it was originally intended. That is to say, it does nothing to help the market and overall economy. Instead, the 4 property rule can significantly weaken the economy.
Prior to the mortgage meltdown, most real estate investors took advantage of astronomical appreciation. They practiced what all good investors practice: buy low/sell high. Most investors were buying everything they could and mortgages were easy to come by. Some bought to flip, some held in their own rental portfolio and some bought properties in bulk. All of those activities pumped a lot of money into the economy.
If there were no 4 property rule, the sale of of real estate would lead to a number of positive effects. For example, the revenues generated would lead to increased liquidity. It would also generate significant tax revenue to the state and local governments. And, of course, affordable housing would be plentiful. With this 4 property rule, none of this is possible. Hopefully, this rule will be overturned so we can return to a free market approach to investment real estate.
The good news is, regardless of whether or not this rule is revoked, portfolio lenders do not have to follow this 4 property rule. If you have more than 4 financed properties (or hope to), a portfolio lender is what you need. - 16752
About the Author:
Susan Lassiter-Lyons has been teaching real estate investors all about investor loans since 2002. Her free report, The Death of Real Estate Investing, reveals how to find portfolio mortgages nationwide.
