Most real estate investors hit a wall after buying just a few rental properties. Your bank tells you you’re maxed out. Your mortgage broker says you’ve reached your limit. But here’s the truth: you can buy way more properties than you think.
The secret isn’t finding more money or boosting your income. It’s understanding how to work with different types of lenders in the right order.
Why Most Investors Get Stuck
Financing is the biggest challenge in building a rental property portfolio. Not finding deals. Not property management. Financing.
Here’s what typically happens: You buy a few properties through your bank. Everything seems fine. Then suddenly, they tell you they can’t approve another mortgage. You assume you’re done.
But you’re not. You just need to know where to go next.
Book Your Strategy CallThe Four Types of Lenders You Need to Know
A Lenders: Your Starting Point
A lenders are the big banks, credit unions, and trust companies. They offer the best rates and terms, but they have strict rules:
- They only count 50% of your rental income when qualifying you
- They cap how many rental properties you can own (usually 5-12 depending on the lender)
- You need to fit within a 44% debt-to-income ratio
Here’s the problem with that 50% rule: Let’s say your property rents for $2,000 per month. Your mortgage and taxes are $1,500. You’re making $500 profit each month. But the bank only counts $1,000 of that rental income. So on paper, they see a $500 loss. This fake loss eats away at your ability to qualify for more mortgages.
B Lenders: More Flexibility, Higher Costs
B lenders work with borrowers who don’t fit the traditional lending box. Their rates run in the low 3% to low 4% range, plus fees of 1% to 1.5% of your mortgage amount.
The big advantage? They’ll accept debt ratios up to 70% instead of the standard 44%. That’s a huge difference in borrowing power.
Commercial Lenders: The Hidden Gem
This is where things get interesting. Most people think commercial mortgages are only for apartment buildings or shopping malls. Wrong.
You can get commercial mortgages on single-family homes. And here’s why they’re powerful:
- Rates in the low 2% range
- They qualify you based on the property’s cash flow, not your personal income
- No stress test in many cases
- Lower down payment requirements
One real example: A fourplex worth $800,000 required a $320,000 down payment (40%) at a traditional bank. Through a commercial lender, the same property only needed $200,000 down (25%). That’s $120,000 in savings right there.
Commercial lenders use something called a Debt Service Ratio. They compare the rental income to the property expenses. Some want to see 1.3 (meaning 30% positive cash flow). Others accept 1.0 (break-even). Either way, your personal income matters way less.
Private Lenders and MICs: Your Last Resort
Private lenders and Mortgage Investment Corporations (MICs) charge the highest rates. Individual private lenders charge 10-12%. MICs charge 5-8%. Both charge fees between 1.5% and 3%.
MICs are better than individual private lenders because they’re stable corporations with millions in funds. Individual private lenders sometimes use personal lines of credit and might need their money back suddenly if they get divorced or lose their job.
You want to avoid this category as much as possible. But knowing it exists means you always have options.
The Order Matters More Than Anything
Here’s the mistake that costs investors millions of dollars: going to lenders in the wrong order.
Some A lenders cap you at 5 properties total, no matter where your mortgages are. Other A lenders let you have 5 properties with them specifically, even if you own 10 properties financed elsewhere.
If you go to the flexible lender first, you waste that opportunity. Once you have 5 properties total, the strict lender will reject you. But if you go to the strict lender first, you can still use the flexible lender later.
The right sequence looks like this:
- Start with A lenders that have absolute property caps
- Move to A lenders that count properties with them only
- Switch to specialized A lenders using 80-100% of rental income
- Transition to commercial lenders
- Use B lenders if needed
- Use private lenders or MICs as a last resort
The Specialized A Lenders Most People Don’t Know About
Not all A lenders are created equal. Some specialize in working with investors and offer way better terms:
- They use 80% to 100% of your rental income (not just 50%)
- They allow 10-12 properties instead of 5
- They don’t require you to keep $100,000 sitting in the bank doing nothing
These lenders have the same great rates as traditional banks. But they actually understand how rental properties work. This alone can double or triple your portfolio size before you need to move to other lender types.
Why Most Brokers Get This Wrong
Most mortgage brokers aren’t investment property specialists. When you max out with one or two A lenders, they send you straight to B lenders or private lenders because it’s easier.
They skip right over commercial options. They don’t know about the specialized A lenders. They cost you thousands of dollars in unnecessary interest and fees.
You need someone who knows the difference between lenders, understands the strategic order, and has relationships with commercial lenders who actually work with investors.
How Commercial Lending Changes Everything
When you shift to commercial lending, the whole game changes. Instead of asking about your job and income, they ask about the property.
Does it cash flow? What’s the debt coverage ratio? That’s basically it.
This means you can keep buying properties even after you’ve personally maxed out on income qualification. The properties qualify themselves.
And don’t make the mistake of just walking into your bank’s commercial department. Different commercial lenders have wildly different requirements. Some require 1.3 debt coverage. Others accept 1.0. Some use stress tests. Others don’t. Some want 40% down. Others accept 25%.
The difference between the best and worst commercial lender for your situation can be tens of thousands of dollars per property.
The Real Strategy for Unlimited Properties
Here’s what unlimited actually means: you’re not limited by arbitrary lender caps or qualification rules. You’re only limited by finding good deals and having down payments.
By working through all four lender types strategically, most investors can own 20, 30, or even 50+ rental properties. Each lender type gives you another batch of properties before you need to level up.
The key is having a roadmap. Know which lender you’ll use for property number 6 before you buy property number 5. Have a plan for what happens when you max out traditional financing.
Stop accepting “you’re maxed out” as the final answer. It’s just the end of one chapter. Three more chapters are waiting.
Book Your Strategy CallFrequently Asked Questions
There’s no hard limit if you work with different lender types strategically. While individual A lenders might cap you at 5-12 properties, you can move to specialized A lenders, then commercial lenders, then B lenders. Most investors can build portfolios of 20-50+ properties by using the right lender sequence.
Most traditional A lenders use a 50% rental income rule as a conservative measure to account for vacancies, repairs, and other costs. This often makes profitable properties look like they’re losing money on paper. Some specialized A lenders use 80-100% of rental income, which gives you much better qualification power.
Commercial mortgages make sense when you’ve maxed out A lenders or when you’re income-constrained but own cash-flowing properties. They qualify you based on the property’s cash flow (debt service ratio) rather than your personal income. You can use commercial mortgages on single-family homes, not just apartment buildings.
B lenders charge interest rates in the low 3-4% range and accept higher debt ratios (up to 70%). Private lenders and MICs charge 5-12% interest and are more expensive. B lenders are a step down from A lenders, while private lenders should be your last resort.
A mortgage broker who specializes in investment properties gives you access to multiple lender types and can create a strategic roadmap. Bank employees only know their own institution’s products and can’t help you sequence lenders properly. This sequencing can mean the difference between 5 properties and 20+ properties.
A debt service ratio (DSR) compares a property’s rental income to its total expenses. A 1.3 DSR means the property generates 30% more income than its expenses. Some commercial lenders require 1.3, while others accept 1.0 (break-even). This ratio determines if the property qualifies for financing, regardless of your personal income.
Some lenders cap you at a total number of properties (like 5 total), while others cap properties financed with them specifically (5 with them, regardless of what you own elsewhere). If you use the flexible lender first, you waste that opportunity. Going to strict lenders first, then flexible ones, can double your portfolio capacity.
Yes. MICs (Mortgage Investment Corporations) are large corporations with stable funding and typically charge 5-8% interest. Individual private lenders often use personal lines of credit, might need their money back suddenly due to life changes, and charge 10-12% interest. MICs offer more stability and better rates.
