Help! New investor

[Abraham Garza]

Hello, i would like some advice from experienced investors or like minded individuals.. So i currently have about 100k saved up ready for my next move currently i have one occupied single family rental property w about 30% paid off of 230k, i want to acquire another rental property, flip, or raw land pretty much a good investment and where i could hold my money but i am having trouble getting approved for a loan being that i am a contractor and their is gaps in my employment between jobs also my debt to income is a bit of a problem but as a contractors i know the money side is volatile but i know i can manage. So my question is should i pay off my home and take out a heloc, should i save up more and buy cash which would take some time now that 100k isnt much in Houston.. owner finance, private lending or look elsewhere (out of state, raw land)?

[Melissa Justice]

@Abraham Garza,

Great question and you're in a strong position with $100K saved, a rental already under your belt, and the drive to scale. The challenges you're facing with traditional lending (due to being a contractor with irregular income and higher DTI) are super common for self-employed investors, but the good news is, you've got creative financing options that could get you moving RIGHT NOW.

First: Consider a DSCR Loan
If you're not already familiar, a Debt-Service Coverage Ratio (DSCR) loan is designed specifically for investors like you:

Why DSCR Loans Could Work for You:
* No W2 income or tax returns required

* Approval is based on the cash flow of the property, not your personal income
* Ideal for contractors, self-employed, and 1099 workers
* You can often close in an LLC and start building a portfolio separately from your personal name

Example: If a property's monthly rent is $1,800 and the PITI (mortgage, taxes, insurance, etc.) is $1,300, your DSCR is 1.38, which would likely qualify.

These loans typically require 20–25% down, so you could easily deploy your $100K for one or even two investment properties in the right markets.

Should You Pay Off the Existing Property?
Probably not the most efficient move if your goal is to scale. Here’s why:

* You’d lock up a ton of equity that could otherwise be working in multiple properties
* You’ll still face qualifying issues if you go back to a traditional loan
* A HELOC or cash-out refinance could make more sense, but again, you'd run into DTI/income documentation issues unless you go the DSCR or asset-based route

Other Smart Options to Explore:
* Out-of-state investing: You’re right - $100K doesn’t stretch far in Houston, but in places like Indianapolis, Columbus GA, Birmingham, or Citrus Springs FL, you could buy a turnkey rental with solid returns.
*Private money lenders: If you’re planning a flip, some private lenders will fund 80–90% of the purchase and 100% of rehab if you have experience or a strong plan.

TL;DR Action Plan:
1. Talk to a lender who specializes in DSCR loans - this may be your fast track to scaling
2. Identify 1–2 out-of-state markets with affordable properties and good cash flow (happy to help with recs)
3. Use $100K to acquire a new rental (or two) without W2 income issues
4. Keep the current rental leveraged - don't rush to pay it off unless you're going to 1031 or refinance

You’ve already done the hard part by saving and getting started - now it’s just about deploying that capital the right way. Feel free to reach out if you want to chat specific markets or get connected to a lender who understands investor financing like DSCR. You're in a great spot to take the next step!

Best of luck,

Melissa