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How to borrow more money for investment properties

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Hoang P.

Residential Landlord from Cincinnati, Ohio

Mar 05 '11, 01:04 AM
2 votes


Hi everyone, I don't have much experiences in borrowing money and would like to ask for advices. Here is my sum up situation:
I bought my 1st rental property in Oct 2008. Currently I own 5 rental properties + my Home. I don't have any mortgages except for the $90K equity line of credit I took out on my Home to buy the last 2 rental properties. So right now, all I owe is the $90K on the equity line at the interest rate of 2.74% with a payment of $190/month. All 5 of my rental properties are renting to Section 8 tenants for the total of $5050 per month (all 5 properties are on 1 year lease with Section 8). I currently don't have a job with a credit score of 725. My wife is working with a salary of 45K/year. Her credit score is 840.
My question is: how do we go about borrow more money to purchase more investment properties? What are my best options? Any suggestions is greatly appreciated. I'm in Louisville, Kentucky BTW.


Edited Mar 5 2011, 01:11 by Hoang P.


Will Barnard Moderator Donor

Real Estate Investor from Santa Clarita, California

Mar 05 '11, 04:46 AM
3 votes


With 5 properties owned free and clear producing 5k+ monthly gross, u should be able to leverage some or all of them with a cas out refi. U can also speak with people who currently own bank cd's and offer them more attractive rates secured by your re holdings. Keep the ltv under 60%.



Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Jeffrey K.

Real Estate Investor from Milwaukee, Wisconsin

Mar 05 '11, 05:23 AM
1 vote


My goal would be to refi the property into fixed rates before that 2.74% becomes a lot more.



Luis A.

Real Estate Investor from Atlanta, Georgia

Mar 05 '11, 05:37 AM
5 votes


Originally posted by Hoang Phan:
I currently don't have a job

That is the kiss of death right there :cry:

I agree with others that your best bet is to try and refi but believe me, and I say this from experience, most underwriters will only focus on the lack of employment. They want to see income from a W2. For the properties they will only count maybe 75% of rental income.

Ask other investors and find small, local banks where you can actually talk to the person making the lending decision. Go ahead and calculate your debt to income ration and put together a portofolio of your rental properties so you can show you know what you are doing. Also put together a personal balance sheet and be ready to back it up with tax returns.

Please let me know how it goes.
I'm not being negative I am just saving you grief, I hope you can prove me wrong.



Hoang P.

Residential Landlord from Cincinnati, Ohio

Mar 05 '11, 06:21 AM


Thank you for all the inputs. After I had my 3rd property, I did have a job at UPS making $10/hour . At the time I bought my 4th rental property, I hired a guy (handyman) to help me fix it up. We worked together before fixing my first 3 properties . But this time, I'm not around because of my job working at UPS, and I found out that he was trying to screw me over by not showing up to work until 3-4 p.m everyday. I got off work around 6 p.m and come over to the house, only to see that not thing is done from the previous day. I've been paying him 8 hours/day for 2 weeks and not much was done. So, I fired him and quit UPS to fix the house up myself. I can do pretty much everything except for electrical work or major plumbing. I just can't see to pay him 8 hours/day when he only works 2 hours or less. It is difficult for me trying to hold a full time job and buying houses, fixing it up at the same time. How is other full time investor/handyman able to obtain loans to purchase investment properties ? Again, thank you for all the inputs.

Originally posted by qkjones:
Originally posted by Hoang Phan:
I currently don't have a job

That is the kiss of death right there :cry:

I agree with others that your best bet is to try and refi but believe me, and I say this from experience, most underwriters will only focus on the lack of employment. They want to see income from a W2. For the properties they will only count maybe 75% of rental income.

Ask other investors and find small, local banks where you can actually talk to the person making the lending decision. Go ahead and calculate your debt to income ration and put together a portofolio of your rental properties so you can show you know what you are doing. Also put together a personal balance sheet and be ready to back it up with tax returns.

Please let me know how it goes.
I'm not being negative I am just saving you grief, I hope you can prove me wrong.



Jeff S. Donor

Real Estate Investor from Portland, Oregon

Mar 05 '11, 06:58 AM
1 vote


How many more houses do you want to buy? What price do you want to pay for your next house?

It seems to me with rental income and your wife working you should be able to get loans, even if it is a smaller percentage of each property.

If you consider your wife's income of $45,000 and 50% rule (overly conservative for qualifying usually higher) you have $75,300 (45,000+60,600 rent x.5=30,300)= $6,275 per month times 28% for conventional financing = $1757 for a payment for PITI. That even counts taxes twice so super conservative figures.



Hoang P.

Residential Landlord from Cincinnati, Ohio

Mar 05 '11, 07:18 AM
1 vote


My goal is to have 10 rental properties. I made a mistake with my first property by buying it at $60K and spent 40K to rehab it. After that I tried to stay in the range of 60K or less for each property total. The last house I just bought back in Jan for $53K. Fannie Mae already painted the whole house and replaced all carpet. I spent $4K on appliances, fixing and updating electrical, plumbing. Total was right at $57K and I rented it out 3 days after closing for $950/month. That is the range I'm comfortable with.

Originally posted by Jeff Sielicky:
How many more houses do you want to buy? What price do you want to pay for your next house?

It seems to me with rental income and your wife working you should be able to get loans, even if it is a smaller percentage of each property.

If you consider your wife's income of $45,000 and 50% rule (overly conservative for qualifying usually higher) you have $75,300 (45,000+60,600 rent x.5=30,300)= $6,275 per month times 28% for conventional financing = $1757 for a payment for PITI. That even counts taxes twice so super conservative figures.



Jeff S. Donor

Real Estate Investor from Portland, Oregon

Mar 05 '11, 07:43 AM
1 vote


You could write an offer subject to financing with 20 or 25% down on your next house and get financing as far as I can see.

Go to your own banker and talk to them. If that doesn't help, loan brokers and/or private money, maybe even someone from here might help.



David Beard

Real Estate Investor from Cincinnati, Ohio

Mar 05 '11, 07:49 AM
1 vote


Hoang, couple of questions:

* How much are your other monthly obligations, such as the 1st mortgage on your primary residence, any consumer loans, and any credit card balances? (hopefully none of these latter two)

* How much do you have in liquid reserves at the present time, including bank accounts, mutual funds, 401-K accounts, IRA accounts, as well as any stocks or bonds.

Given this information, we should be able to come up with some financing ideas. Louisville has several investor-friendly banks, (I like First Capital), so that is favorable.

In your favor: three years of successful landlording experience, excellent credit, spouse with steady wage income.



E-Mail: [email protected]
Telephone: 502-321-6328


Hoang P.

Residential Landlord from Cincinnati, Ohio

Mar 05 '11, 08:06 AM


Hi David, as I mentioned above, I do not have any mortgages. Only loan I have right now is the Home Equity Line of Credit I took out on my primary resident, which is $90K at interest rate of 2.74% (20 years term). My current minimum payment on this loan right now is $190/month. I don't like to pay interest on credit cards so I always paid my balance off every month. As for the 401K and Roth, I sold them all and that's how I paid for the first 3 properties. I spent pretty much all the money I had when I bought the last property back in Jan, so right now my liquid reserve is about $15K ($10K from Feb, March rent).
My current monthly obligations are $190 (HELOC) + utilities bills + gas + groceries

Originally posted by David Beard:
Hoang, couple of questions:

* How much are your other monthly obligations, such as the 1st mortgage on your primary residence, any consumer loans, and any credit card balances? (hopefully none of these latter two)

* How much do you have in liquid reserves at the present time, including bank accounts, mutual funds, 401-K accounts, IRA accounts, as well as any stocks or bonds.

Given this information, we should be able to come up with some financing ideas. Louisville has several investor-friendly banks, (I like First Capital), so that is favorable.

In your favor: three years of successful landlording experience, excellent credit, spouse with steady wage income.



David Beard

Real Estate Investor from Cincinnati, Ohio

Mar 08 '11, 11:32 AM
3 votes


Hoang, let me run your scenario by my conventional lender at US Bank, to see if there would be a chance you could do loans on all five of them concurrently (talking about 30yr fixed rate loans around 5.50% currently).

Your debt ratios will be fine. Your liquid reserves may need to be shored up for a few more months to get them all done. You could potentially refi a couple of them initially, then do the other three in a few months. Can you confirm that none of your three credit scores are below 720? You may want to pull them all if you haven't done so. Also, I assume your wife has been at her job for a good while? Or at least in the same profession for the last couple of years?

Thanks.



E-Mail: [email protected]
Telephone: 502-321-6328


This post has been removed.

Bryan Hancock

Real Estate Investor from Round Rock, Texas

Mar 08 '11, 01:31 PM
2 votes


With a DSCR of 1.25 one of our local credit unions will loan money. I had a conversation very similar to what you are asking about today with Amplify and they have $40M to lend in the short run.

You should try hitting up some small, regional banks and credit unions.



Medium_inner10_logo__updated_Bryan Hancock, Inner 10 Capital
E-Mail: [email protected]
Telephone: 1-800-577-0401
Website: http://www.inner10capital.com/invest/
Our Recent Austin Business Journal Article - http://tinyurl.com/Inner10Capital


Account Closed

Indianapolis, Indiana

Mar 08 '11, 06:37 PM


I bet you can get homes cheaper in Louisville (since you are buyer rentals). This will help you get that 10 rental goal much faster.



Hoang P.

Residential Landlord from Cincinnati, Ohio

Mar 08 '11, 08:38 PM


Hello again everyone, and thank you all for the inputs.
To answer David, my credit score as of yesterday (3-7-2011) is 739, my wife credit score is 794. This was done by Fifth Third Bank. We went to talk to them about our needs to borrow more money/refinance on the rental properties. The answer we got is: they do not deal with SFR rental properties. However, they offered us to increase our Home Equity Line of Credit from $97K to $160K (80% LTV) of our primary resident at a rate of 5% (variable rate). I really hate to loose our current HELOC at 2.74% but again, if this is the only way to get more money, I might take up their offer.
After speaking with Fifth Third Bank, I took David recommendation, went to First Capital Bank main location and talk to Assistant Manager (James John) about my situation. He said he could do a line of credit of 60% LTV for the 5 properties, but he need to talk to the commercial department first. 3 hours later, he called me back and said that they had some bad experiences on loans for SFR rental properties in the last couple of years and got stuck with properties that they do not want. Therefor, they're no longer offer loans on SFR rentals.
My wife is an account payable at a local company downtown. She been working there going on 11 years. David, I realized that you're also from Louisville, KY. How is your real estate business doing lately ? Again, I do appreciate your time and inputs very much. Love to hear from you again.

Originally posted by David Beard:
Hoang, let me run your scenario by my conventional lender at US Bank, to see if there would be a chance you could do loans on all five of them concurrently (talking about 30yr fixed rate loans around 5.50% currently).

Your debt ratios will be fine. Your liquid reserves may need to be shored up for a few more months to get them all done. You could potentially refi a couple of them initially, then do the other three in a few months. Can you confirm that none of your three credit scores are below 720? You may want to pull them all if you haven't done so. Also, I assume your wife has been at her job for a good while? Or at least in the same profession for the last couple of years?

Thanks.



Ann Bellamy Verified

Real Estate Lender from Tyngsboro, Massachusetts

Mar 08 '11, 09:21 PM
2 votes


I think you are getting discouraged when 1 or two banks say no. I identify, I tend to do the same thing, as do almost all of us. The trick is to keep going after 7 or 8.

So make a list of the small local banks in your city, and credit unions. Speak to the commercial loan person. They may consider a blanket commercial loan. However, you will probably have to title the properties in a company name, so that the commercial lender can stay in compliance with SAFE, etc.

Also, you sound to me as if you are doing very well. But quitting your job to finish a rehab may actually help you in the long run. If you can't get a job, you may be forced to be a full time real estate investor. Most full time investors don't do their own rehabbing, they hire it out, and focus on finding deals. Or they do part of it, and sub out part of it. I think maybe if you had focused on finding a contractor who didn't cheat you, you might have been better off.

Go to your local REIA - real estate investor association - and meet some more investors in your area who are successfully doing what you are doing. They may be able to point you to a local lender who can help. And help you find an honest contractor.

In your situation, I don't think I'd use hard money - the carry costs will eat you alive if you are doing all the work yourself and it takes longer. also, if you can't refinance out, hard money won't help anyway.

Good luck, sounds like you just have a couple of bumps, you are doing well, I think.



Medium_small_logoAnn Bellamy, Buy Now, LLC
Telephone: 800-418-0081
Website: http://www.buynowhardmoney.com
Hard money lending in NH and MA, and for free networking in MA, http://www.BlackDiamondREI.com


Don Doji

Mar 08 '11, 09:34 PM


i have a similar situation...thx for all the input guys



Hoang P.

Residential Landlord from Cincinnati, Ohio

Mar 08 '11, 10:00 PM


Thank you Ann for the kind words, I'm not ready to give up just yet. If unable to obtain loans, I can always save up and do 1 property per year using the money save up on rental income. In the mean time, I've been searching for small local banks and will try to talk to them. Quitting my job at UPS actually based on 2 reasons: 1- I used to be a Team Leader at Ford Motor Truck Plant, making $29/hour for 12 years. Going to work at UPS everyday making $10/hour, I was depressed the whole time. 2- Paying that guy everyday for doing nothing is just pushed me over the edge. That's why I decided to quit and do the works myself.
I'd love to be able to do what you said "full time investor", but don't have the knowledge or the money to do that just yet. The idea of buying properties, have someone fix them up and sell it for profit is absolutely appealing. But until I can afford to pay, I have no choice but do most of the works myself.
The reason for me not having my rentals in LLC is that I've been reading this forum and there are some comments such as it is harder to obtain loan for SFR rentals if they are in LLC. Some also said about taking the properties out of LLC and put in their personal name to refinance. I know it is a good idea to have LLC for my rentals for my own protection, but not sure if it would be harder for me while I'm trying to get loans. That is why I'm not sure if I should form LLC now or wait until after I'm able to obtain a loan first, then form an LLC. Again, thank you everyone for the time and inputs.
Also, I want to apologize in advance for my bad English/grammar. I do not wish to offend anyone here and trying to do my best when writing. English is my second language. Like I said before, I'm a newbie in real estate investing and trying to learn from the pros. Any help/info is greatly appreciated.

Originally posted by Ann Bellamy:
I think you are getting discouraged when 1 or two banks say no. I identify, I tend to do the same thing, as do almost all of us. The trick is to keep going after 7 or 8.

So make a list of the small local banks in your city, and credit unions. Speak to the commercial loan person. They may consider a blanket commercial loan. However, you will probably have to title the properties in a company name, so that the commercial lender can stay in compliance with SAFE, etc.

Also, you sound to me as if you are doing very well. But quitting your job to finish a rehab may actually help you in the long run. If you can't get a job, you may be forced to be a full time real estate investor. Most full time investors don't do their own rehabbing, they hire it out, and focus on finding deals. Or they do part of it, and sub out part of it. I think maybe if you had focused on finding a contractor who didn't cheat you, you might have been better off.

Go to your local REIA - real estate investor association - and meet some more investors in your area who are successfully doing what you are doing. They may be able to point you to a local lender who can help. And help you find an honest contractor.

In your situation, I don't think I'd use hard money - the carry costs will eat you alive if you are doing all the work yourself and it takes longer. also, if you can't refinance out, hard money won't help anyway.

Good luck, sounds like you just have a couple of bumps, you are doing well, I think.



Bryan Hancock

Real Estate Investor from Round Rock, Texas

Mar 08 '11, 10:27 PM
1 vote


Many cities have a small, regional bank broker that can point you to who has money to lend and will lend it. Louis Drott in Austin serves this purpose.

Network around and see if you can find such a person in your neck of the woods.



Medium_inner10_logo__updated_Bryan Hancock, Inner 10 Capital
E-Mail: [email protected]
Telephone: 1-800-577-0401
Website: http://www.inner10capital.com/invest/
Our Recent Austin Business Journal Article - http://tinyurl.com/Inner10Capital


Jeff S. Donor

Real Estate Investor from Portland, Oregon

Mar 08 '11, 11:44 PM
1 vote


Going with variable loans is risky. If you find properties without mortgages you can find an investor to give you smaller first mortgages combined with your cash down and have the seller carry a second. With the second being larger and at a lower rate you can offer a very attractive higher rate and smaller percentage first.

Keep looking though.If you choose variables then you could get a fixed rate for say five years or so. You could use your plan of going slower to allow you to pay down your variables quickly. Good luck.



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