Generally speaking, there is no limit in the United States for how many houses can you own for American citizens. According to Fannie Mae, the maximum is ten. Undoubtedly, getting conventional financing for ten properties will be tricky, so be prepared for those challenges. Consequently, the better question is, how many houses can you own with bank financing? Many investors find the limit of about five homes that a single banking institution will allow you to finance through mortgage loans at once.
A quick guide to the home buying process
In a nutshell, for first-time homebuyers looking to finance a new home as their primary residence, the steps are relatively straightforward. Mortgage lenders will check credit scores, DTI, and tax returns and ask about upfront funds like down payments. Once this process is approved, mortgage rates will determine mortgage interest and choose the best loan type. In most first homebuying transactions, borrowers use federally backed loans like FHA, so the property must be a single-family home. The final step is to find an experienced real estate agent, find the ideal home, and get on the road to homeownership.
An introduction to investment properties
Although that sounds easy enough, many people want to acquire rental properties that can earn passive income for investment purposes. In order to make this happen, mortgage brokers are available to help finance these properties. When investing in the residential real estate market, there are multiple options for getting funding. A seasoned and experienced lender will be your greatest ally. Alongside your lender, you will need to find a realtor who understands the area’s home prices and the depreciation and growth of the location you are looking to buy into.
How to manage your investment property
Last but not least, property management companies are highly recommended. They will ensure your investment is well taken care of by collecting the renter’s monthly payments, paying HOA fees, and managing your rental property to ensure it efficiently covers both mortgage payments and accruing value through rental income. Generally speaking, property management companies perform a great deal of tasks, so you don’t have to, therefore giving you time to find your next property.
What does a property manager do?
Handle tenant concerns to reduce your rental headaches
Management of maintenance and repairs to lower costs
Act as the point of contact, so you don’t have to
Market and monitor the rental
Facilitate tenant communications to reduce turnover rate
Screen tenants and weed out any problematic prospects
Ensure on-time payments and collect rents
Conflict resolution to avoid potential legal issues
How many houses can you own in your name?
Overall, the number of houses borrowers can have in their personal name is unlimited. Nevertheless, owning a rental or investment property can be a tricky business. Primarily because of the liability an investor will assume in the case of an accident. In essence, if a tenant or a guest of a tenant were to fall and incur an injury that could require surgery or sustain a life-altering injury, and the property is in their personal name, the injured party may sue for damages. In this case, any asset owned by the homeowner, including their own home, could be leveraged to pay for restitution. Given these points, most investors place their properties into an LLC.
Should investment properties be held in an LLC?
Let’s start by explaining what an LLC is. LLC stands for Limited Liability Company; in essence, this company structure protects an investor from the company’s liabilities. It is prudent to structure real estate investment properties within an LLC properly. Since it can be tricky to purchase a property as an LLC, many investors buy the property under their name and then transfer it into an LLC before it is rented out or construction begins.
Additionally, investment properties can also be added to trusts. Trusts are helpful if the investor dies and will keep the property from entering probate. Overall, it is wise to remain as anonymous as possible as an investor. Consequently, many investors use LLCs to protect their privacy. Since LLCs are typically under names that aren’t associated with the investor’s private identity, they provide one more layer of security from personal liability.
How many houses can you own under an LLC?
It all comes down to liability. In a similar matter to personal liability, where the owner has investments in their own name, LLCs run the same risk. If you have ten homes held under an LLC, and there is a substantial lawsuit, you can run the risk of all of that LLC’s assets, i.e., all ten homes, used as collateral to mitigate the liability. Therefore, many investors use one LLC for each individual property. Although this is the safest bet, keeping all LLCs operating effectively every year is tedious.
For this reason, many investors choose to use one LLC per region. For instance, if an investor owns multiple homes in the state of New York, they may decide to have an LLC for all properties in Harlem and another LLC for the properties in Manhattan. That way, all of the properties wouldn’t be at risk if one property had a catastrophic liability.
Do tax restrictions limit how many houses you can own?
Broadly speaking, no tax regulations restrict the number of houses you can own; however, there are capped property tax deduction limits and tax rules on how many allowable deductions you can take advantage of. Keep in mind the federal government taxes more than just investment income. Rental properties are taxed on dividends, interest, and rent on real estate, and also realized capital gains.
That being said, many tax advantages and write-offs are available to you as a multi-property owner. Another consideration as a real estate investor is the classification standard regarding the sale of properties. To avoid being classified as a real estate dealer, you must wait to sell off investment properties too quickly or too often. Once you are labeled a real estate dealer, you will run into a new set of rules of conduct and tax restrictions. Given these points, buying and holding properties rather than buying and quickly selling them is advised.
Is there a limit to how many houses you can own with private lender’s money?
In some cases, properties are available for purchase through owner financing. These situations are ideal. If you are lucky enough to find a property offered through homeowners financing, jump on it. Often, these motivated sellers will even offer lease options. By using these private funds, there is no limit to how many houses you can own. Of course, when investing in real estate, you can always pay cash for any property without any restriction on the quantity of properties owned if you have the cash flow to do so. Also, there are options for private lending if you don’t want to use your money. Private lending is also called hard money.
These are typically funded by accredited high-net-worth groups, individuals, or conglomerates as opposed to institutional banks. Private lender loans are most often non-owner occupied, short-term, interest-only, and more flexible than traditional bank loans and may result in an easier and faster loan approval process. In a competitive housing market like the current one, this gives an investor the ability to move forward with a higher likelihood of acquiring the property they want. – Forbes
In the final analysis, just because there are factors that could limit the number of properties an investor acquires, a good lender can find solutions for any or all of them. So how many houses can you own? There are no limits.
Let’s connect you to a Lender that can help.
Your home plays a major role in financial security. So, regarding your mortgage loan, you want to be sure you’re making responsible decisions. Undoubtedly, the loan process invokes insecurity in many people. In particular, navigating through a sea of paperwork and financial jargon can be unsettling without honest guidance. In fact, a lack of clarity can lead you down the wrong path and compromise your financial future.
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