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.
So, what specifically is the 4 property rule? Essentially, the new rules of conventional lending state that a person will be limited to four financed properties at one time. Again, this is a thoroughly absurd rule that undermines many benefits of real estate investing. Basically, if you are limited to only four financed homes, you can not flip property in vast numbers.
And, as an investor this includes your primary residence! Again, this rule does nothing to help real estate investors. It is simply protectionism. And, as we all know, protectionism usually backfires. It does absolutely nothing to help the market and overall economy. Instead, the 4 property rule can significantly weaken the economy.
For example, prior to the current economic meltdown, many legitimate investors took advantage of skyrocketing real estate values. They would purchase properties at low prices and then sell high. In some cases, real estate investors would purchase significant volumes of property for resale. Some investors would purchase literally dozens of properties for resale. The profits derived from this wholesaling had an enormous benefit on the overall economy.
If the 4 property rule went away, there would be many positive effects. First, real estate investors would have to put their profits somewhere and my bet is they would go to the stock market. That in itself would provide a huge amount of liquidity. It would also fill up the tax coffers. And, of course, the wealth created would lead to more real estate being purchased thus improving values overall. The 4 property rule accomplishes none of this. I hope this rule will be overturned so we investors can fully participate in and contribute to the economic recovery.
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. - 16463
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.
So, what specifically is the 4 property rule? Essentially, the new rules of conventional lending state that a person will be limited to four financed properties at one time. Again, this is a thoroughly absurd rule that undermines many benefits of real estate investing. Basically, if you are limited to only four financed homes, you can not flip property in vast numbers.
And, as an investor this includes your primary residence! Again, this rule does nothing to help real estate investors. It is simply protectionism. And, as we all know, protectionism usually backfires. It does absolutely nothing to help the market and overall economy. Instead, the 4 property rule can significantly weaken the economy.
For example, prior to the current economic meltdown, many legitimate investors took advantage of skyrocketing real estate values. They would purchase properties at low prices and then sell high. In some cases, real estate investors would purchase significant volumes of property for resale. Some investors would purchase literally dozens of properties for resale. The profits derived from this wholesaling had an enormous benefit on the overall economy.
If the 4 property rule went away, there would be many positive effects. First, real estate investors would have to put their profits somewhere and my bet is they would go to the stock market. That in itself would provide a huge amount of liquidity. It would also fill up the tax coffers. And, of course, the wealth created would lead to more real estate being purchased thus improving values overall. The 4 property rule accomplishes none of this. I hope this rule will be overturned so we investors can fully participate in and contribute to the economic recovery.
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. - 16463
About the Author:
Susan Lassiter-Lyons has been teaching real estate investors all about investor financing since 2002. Her free report, The Death of Real Estate Investing, reveals how to find portfolio lenders nationwide.
