A couple of months ago I had heard the news that banks were going to limit the number of loans for real estate investors to 4, so that meant that if you already had 8 places you could no longer get a loan for additional properties. Of course, we always have to look at the fine print in these situations because the loan limit is based on securitized loans, those that are backed by Freddie Mac and Fannie Mae.
But, sure enough, on December 1st, this rule did pass and the rule of 4 is now in effect. You can read another article here on Realtor.com about how this has been received in the investor community. Basically, what many will do, if these options are available to them, is 1) pool cash resources, 2) combine with other investors to buy, 3) seek out non-securitized loan options (which might include seller financing) or local banks that keep in-house loans, or what is more commonly called “portfolio loans”.
I’ll be curious to see if this pushes more investors into considering 1031 tax deferred exchanges whereby they sell current properties and consolidate to a single larger property, thus opening up the possibility of buying more investments by reducing loan counts along with maximizing their portfolio by getting more units, economies of scale, and taking advantage of the depressed sales prices for these mid-range properties.
The future of real estate investing for the smaller size investor is certainly interesting to say the least!
