Is putting properties in an entity worth it?

Question

I have two rentals and I'm curious if putting them into a separate entity will lower my personal DTI, or do they still count the properties since I'm technically still the one guaranteeing the loans.

Mike D'Arrigo · Answer

As you're on the loans, they'll count them towards your DTI, however, if you have 2 years of tax returns showing positive income, it should actually help your DTI ratios. The bigger issue is that once you put the properties in an entity, the lender could either recall the loan or make you put it back in your own name.

Matt Todd · Answer

What is a good amount for reserves?  How much over the piti should I be making each month?

Duncan Taylor · Answer

Yes, you are losing money, you just don't know it yet. Wait  until you have an extended vacancy or a major repair. You need reserves  and at $75 a month over the PITI, you are not making any money nor  building any reserves.

Matt Todd · Answer

Bill, thank you for the advice

Mike D, thank as we'll

Matt Todd · Answer

Duncan , my mortgage taxes and insurance for the property add up to 675 a month, I am receiving 750 in rent each month for that property

Bill Gulley · Answer

All debts that you have made or guaranteed personally that will have payments due for more than 6 months will be used in your DTI ratio regardless of how you move properties around, it has no effect on your liability. :)

Duncan Taylor · Answer

At 675 PITI and 750 rent, you are losing money and should sell it as soon as possible. Use the proceeds to payoff the credit card debt.

Matt Todd · Answer

one I have held since 08 as a rental,750 and piti is 675.  The other rental property is only been active for six months so still needs a year and a half before that is counted. One property I have 40k equity and the other is about 15k

Chris Martin · Answer

If you have good credit, you may want to try www.lendingclub.com or www.prosper.com for small (dollar wise) amounts on high rate cards

Duncan Taylor · Answer

So, you haven't held them long enough for the lender to count the rents in your income? Or with that you are still over the max DTI?

What equity do you have in the units?

Is putting properties in an entity worth it?

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