Exploring the 4 Property Rule
Portfolio lending is on the rise. The main reason for this is portfolio lending is not subject to the crazy 4 property rule. Through a portfolio lender, it is possible to have more than 20 mortgages. But those investors looking for conventional loans through lenders such as Fannie Mae and Freddie Mac will run into the 4 property rule wall.
It is obvious that the $750 billion bailout did not do a thing to free up capital. And now the 4 property rule is a slap in the face to all real estate investors. In fact, this particular rule is a complete rejection of the principles that our capitalist society is founded on. In my opinion, the 4 property rule is designed to put real estate investors out of business. Just when the government should be inviting us to participate in the economic recovery.
So, what exactly is the 4 property rule? Well, the new conventional lending rules according to Fannie and Freddie state that a person will be limited to a maximum of four financed properties. This ridiculous rule takes away the ability to invest in real estate in the long term. If you are limited to only four financed properties, you can not flip many properties simultaneously or have a rental portfolio of any significance.
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 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.
It is obvious that the $750 billion bailout did not do a thing to free up capital. And now the 4 property rule is a slap in the face to all real estate investors. In fact, this particular rule is a complete rejection of the principles that our capitalist society is founded on. In my opinion, the 4 property rule is designed to put real estate investors out of business. Just when the government should be inviting us to participate in the economic recovery.
So, what exactly is the 4 property rule? Well, the new conventional lending rules according to Fannie and Freddie state that a person will be limited to a maximum of four financed properties. This ridiculous rule takes away the ability to invest in real estate in the long term. If you are limited to only four financed properties, you can not flip many properties simultaneously or have a rental portfolio of any significance.
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 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.
About the Author:
Susan Lassiter-Lyons has been teaching real estate investors the secrets to investor financing since 2002. Her free report, The Death of Real Estate Investing, reveals how to find portfolio lenders nationwide.
posted by Debt Consolidation Loan at
5:52 AM
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