How Many Rental Properties Can You Own? (Explained)

Real estate investing is an excellent way to accumulate wealth and create passive income. Still, it is essential to educate yourself about what it means to be a real estate investor. For example, one of the biggest questions that you may ask is, “How many rental properties should I own?”

This question can be challenging to answer. As a real estate investor, you may be okay with owning just one rental property. However, you may also find owning dozens of rental properties beneficial.

You will need to consider several options before making your first real estate investment. We will walk through some of these options and talk about the risks involved with owning one or multiple rental properties. Hopefully, after considering these options, you can make the best choice for your real estate investing career.

How Many Rental Properties Can I Buy?

You can buy as many rental properties as you can afford if money is not an issue. You can purchase properties with your own money, through private financing with the seller, or a hard money loan.

You may be wondering if there is a limit to how many rental properties you can own. There is no limit on the number of rental properties you can own if you can make the loan payments and maintain the properties. As a real estate investor, you have the freedom to decide how you want to run your business.

How Many Properties can you Buy in a Year?

You can buy an unlimited number of rental properties in a year if this is a part of your business plan and you have the money to accomplish this goal. However, there may be limits to the number of properties you can buy if you get a standard mortgage.

These programs include conventional, Fannie Mae, Freddie Mac, FHA, VA, and USDA. These loans generally have restrictions on how many loans you can have to finance rental properties at one time.

For example, FHA and VA loans will only finance a primary residence. So, if you need to relocate and cannot sell your home, you will not be able to get an FHA or VA loan for your new residence. These traditional mortgage options also have a higher credit score and down payment requirements for rental properties than a primary resident.

You can avoid the complications of getting a standard mortgage when you are a first-time real estate investor with limited funds. There are many creative ways to finance your real estate investing business. These financing options do not restrict how many rental properties you can own. Some of these creative financing options include:

1) Hard Money Loans – Most short-term loans have a 12-month term. You can refinance and get a bank loan at the end of the term. Hard money loans have very few restrictions, such as a minimum credit score or income requirements, and you can receive funds in less than a week.

2) Partnerships – It can be good to partner with one or more people who have more experience and financial resources. For example, you can contribute a small percentage of the money needed to purchase a rental property. In return, you can get their financial backing and knowledge of the real estate industry.

3) Lease Option – This method of financing a rental property is like leasing a car, and it works well if you do not qualify for any loans. You can agree with the property owner to occupy the property and pay rent for a term of two or three years. At the end of the period, you have the option of purchasing the property.

Other ways to finance one or more rental properties include refinancing the mortgage on your primary residence, getting a home equity line of credit, pulling money out of your retirement account, or borrowing money from family.

Setting up an LLC for your Rental Properties

Can you buy multiple rental properties? Yes, you can. When you decide to purchase multiple rental properties, the next step will be to establish a Limited Liability Company.

Real estate investing is a business. You will need to manage assets, evaluate the profit and loss on each property you own, handle the needs of your tenants, and maintain your properties.

An LLC can help protect your assets from litigation if something happens to your tenants by separating your personal and business assets. An LLC may also help to reduce your tax liability. You should consult with your accountant and a real estate attorney to see if an LLC is appropriate for your real estate investing business.

The Benefits of Owning Multiple Rental Properties

Real estate investing is a great way to have financial freedom and build long-term wealth. This business requires a substantial commitment. Yet, there are many benefits to growing your business and acquiring multiple properties.

An interesting question, how many properties do landlords own? According to TransUnion MySmartMove, the average landlord owns three properties. Here are some of the benefits to owning multiple rental properties:

1) More Income – Earning a higher income is the most obvious benefit to owning multiple rental properties. Owning numerous properties means you will have multiple streams of income.

If you own one property and the tenant moves out, you will not have an income until another tenant moves in. Suppose you have five rental properties and one tenant move out of a property. In that case, you can still generate an income from the tenants in the other four properties.

2) Diversification – You can invest in many types of properties. These include single-homes, multi-family homes, apartments, and commercial properties. You can also invest in different property sizes and other real estate markets.

As you build your real estate portfolio, you will want to invest in various property types. A down housing market will have less of an impact on your portfolio.

3) Short-Term and Long-Term ROI – Your Return on Investment measures success in real estate investing. A high ROI indicates a successful investment in a property. In real estate, there is short-term and long-term ROI.

Short-term ROI is the monthly income from rent payments. A successful short-term ROI is when rent payments are higher than the expenses. Long-term ROI is property appreciation. You have a successful long-term ROI when the value of your property is higher than when you bought it.

4) Passive Income – It can be a lot of work and time-consuming managing multiple properties in different areas. However, you can hire a property management company to take care of your properties. They will collect rent payments, handle taxes, and set rent prices. In addition, hiring a property management company allows you to relax and look for more investment properties to purchase.

The Disadvantages of Owning Multiple Rental Properties

There are many benefits to owning multiple rental properties, but there are also some disadvantages. These disadvantages include:

1) More Expenses – Having more rental properties means more expenses. You will have multiple mortgages, insurance policies, taxes, and maintenance. Before investing in numerous rental properties, you should consider the cost to see the profit potential.

2) More Work – Having multiple properties in different neighborhoods or cities requires a lot of work to maintain. One solution for this is to hire a property management company.

Another solution is to invest in a multi-family property or an apartment. Of course, a multi-family residence or apartment have their own set of issues. Still, they are in one location instead of multiple locations.

3) More Initial Capital – It can already be challenging to get a traditional mortgage for a rental property. However, it is more challenging to get a conventional mortgage when you already have multiple properties. Banks require a larger down payment and a higher level of savings to get a traditional loan.

Can You Own Too Many Rental Properties?

Asking yourself how many investment properties can I own will depend on many factors. Investing in multiple rental properties means you will have to deal with more maintenance, property insurance, property taxes, and other expenses.

There are also considerable time commitments. Yet, investing in rental properties is one of the best ways to achieve financial freedom, build wealth, make money, quit your job, or retire early.

My Final Thoughts On How Many Rental Properties Can You Own

After buying your first rental property, look for ways to expand your real estate portfolio. Expanding your portfolio can maximize the amount of money you can make. Do not set any limits to the number of properties you can own. Own as many rental properties as you want.

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