Where to go next... out of DTI and out of good deals

8 Replies

I started the house hacking thing starting back in 2013 and bought a duplex for $67,500. It rents for $1400 a month and has nearly doubled in value. In 2014 I bought another duplex for $130k. It will rent for $1900, but I live in the larger half so it only rents for $900. The plan  was to buy one a year for the foreseeable future until it bought me out of my full time job. The problem is that the multi-family property prices have gone up FAR too fast. Although rents have also significantly increased, they haven't gone up at the same pace. 

I have considered moving to single family rentals, but they have also gone up far too fast and rents are yet to catch up. 

This is all moot however because, although my mortgage broker thought I could be approved for an additional $150,000, after contacting their reps etc they could not make it work as my DTI is far too high.

All of this to say... Where do I go next? It seems like a transactional market these days. Should I switch strategies to fix and flip/ wholesaling?  I prefer buy and hold for long term retirement/cashflow but the market doesn't seem to support it....

Where do I go next??? #askBP

Couple thoughts....do you have any non-real estate debt that you could pay off to lower your DTI? Also, if your property values have gone up that much, you should have a fair amount of equity that you might be able tap into with a HELOC. Check with a portfolio lender. Not all lenders have the same requirements.

I have heard that after two years of rental income it is counted more towards your income. Have you been renting number one for two years yet? Maybe ask the lender (and others) if they are counting your rental Income - and what percent of it - towards your income.

Good luck!

@Jordan Williamson I have heard that after two years of rental income it is counted more towards your income. Have you been renting number one for two years yet? Maybe ask the lender (and others) if they are counting your rental Income - and what percent of it - towards your income.

Good luck!

@Will Pritchett It does count towards my income however the house hacking method mad it so I was only collecting rent from one unit for the majority of the year and after depreciating etc the property showed a loss. Since it is on my return they look at actuals instead of projections. My 2015 return will be much different because eI will have an entire year of both units being rented... I will have the same problem with my current duplex that I am living in unless I figure something else out..

@kyle J. I am working on getting an equity line now, but even with those funds along with additional personal funds I won't have enough to purchase cash and will only be on the verge of being able to pay the 20-25% down for investment property loans. Which again seems to be moot because the prices have changed so dramatically in my market...

The other thought is possibly using some of your cash flow to slowly pay off some properties as you can.

If prices are high you may have to travel further out or get in contact with a wholesaler that can find you a better deal.

@Brent Paul I have definitely considered paying things down, but I feel that is hardly a way to grow. 

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