Rental Property Investor · Member since 2019 · 22 posts · 3 votes
I am new to BP and loving the wealth of information on this app! So a little background on me....Through time while in the military I have acquired three SFH which I have dedicated to each of my kids which bring me cash flow from low $450 to as high as $800 a month. I find myself looking for deals but also have a barrier with a higher debt to income ratio due to bad investments outside of real estate. I am just a hard working parent wanting to leave a debt free house to each of my kids by the time they are in their mid 20's. Even though I am new to BP, I can relate to some of stories and I share the same passion. I am ready to take it to the next level! How can I leverage my properties that have equity but have barriers cashing out due to my debt to income being on the high side? Your advice is greatly appreciated
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
7y
Thank you for your service! Sounds like you have a nice portfolio started, the cash flow is very good. There are a few options, but keep in mind DTI only takes your monthly income in to account, not your equity or assets. Like @Scott Passman mentioned above, you could explore a HELOC, but banks typically only approve you for what your DTI can handle and do not take in to account your equity. I'd suggest you look at any of the factors effecting your DTI and attack those Dave Ramsey style- smallest to largest. If you have a credit card or car payment, use that cash flow and knock it out quickly. Paying off a car with a $300 payment can make a quick improvement to your DTI.
It may not be glamorous, but taking on a part time job a couple nights a week and adding another $500 a month to your income could help you get over the hump. You don't have to do it forever, but until you pay off some bills and can close on a new mtg, it can be a means to an end.
Rental Property Investor · Batavia, IL · Member since 2018 · 452 posts · 672 votes
7y
@Luis Garcia You could open up a HELOC on a property which wouldn't require a new loan. It functions like a line of credit using the property as collateral. Generally has a lower interest rate so it can be an option to get access to funds without generating a new loan.
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
7y
Thank you for your service! Sounds like you have a nice portfolio started, the cash flow is very good. There are a few options, but keep in mind DTI only takes your monthly income in to account, not your equity or assets. Like @Scott Passman mentioned above, you could explore a HELOC, but banks typically only approve you for what your DTI can handle and do not take in to account your equity. I'd suggest you look at any of the factors effecting your DTI and attack those Dave Ramsey style- smallest to largest. If you have a credit card or car payment, use that cash flow and knock it out quickly. Paying off a car with a $300 payment can make a quick improvement to your DTI.
It may not be glamorous, but taking on a part time job a couple nights a week and adding another $500 a month to your income could help you get over the hump. You don't have to do it forever, but until you pay off some bills and can close on a new mtg, it can be a means to an end.
I as well want to thank you for your service Luis. And this post. I am in situation where I need to change things for my family too. I look forward to the responses you'll be getting because they'll help me as well.
Thank you for throwing this out there Luis. I look forward to talking with you sometime buddy.
Rental Property Investor · Springfield, MO · Member since 2016 · 1k+ posts · 890 votes
7y
@Luis welcome to the community of military real estate investors! You can tap into the equity through a HELOC or cash-out refinance. You could also look into refinancing all three into a portfolio loan, and pull the equity out that way if you wanted. There are many ways to leverage your equity!
Rental Property Investor · Member since 2019 · 22 posts · 3 votes
7y
@Scott Passman I agree but my DTI would still get in they way of getting a HELOC. I recently called quicken loans and everything seem to be going well until I gave them my schedule E of taxes. Apparently Quicken loans takes into account what I depreciate on the home and it cancels out my cash flow (making it seem like I didn't make anything).
I read your post and what I get from it is that your main goal is to have 3 paid off homes to your children when they are in their mid 20's. If that is your goal I think you can do that now....The part that is missing is location and neighborhood. I bet you could sell your three homes and take whatever money you get from it and buy 3 homes with the cash and accomplish your goal. The part that I believe is missing what you truly want to accomplish. Is there a specific neighborhood you want or have to be in. What class of neighborhood do you want or have to be in.
I believe there is more to your goals then to leave 3 paid of homes to your kids because you have the ability to do that now.
I think you need to sit down and really find out what your true goals are or where you truly want to be by the time your kids are in their mid 20's. I believe doing this will help you figure out how to accomplish that.
Sorry I don't have a specific plan for you but I think you know what I am asking.
Rental Property Investor · Member since 2019 · 22 posts · 3 votes
7y
@Damaso Bautista thanks for your feedback but selling my three homes is 100% out of the question. I actually want to leverage the equity on my homes to make other investments and unfortunately I find myself trying to figure out how to cash out with a high debt to income ratio. Here is what I have in my portfolio: Home #1 purchased in Charleston SC for $139k back in 2003 with a second mortgage of $60k which was taken out a while ago. I currently owe $140k total and market value is $240k. Home #2 I purchase in Spartanburg SC in 2010 for $133k currently owe $112k and has a market value $180k. This property has a ton of upside potential if I finish the basement and build in the attic. I could easily add 1500 sq ft to this property and could easily have a market value of $360k. This home was built in 1930 all brick with plenty of space. Home #3 I bought in 2016 for $325k but owe $302k. It has a market value of $360-$370k. Question is how can I leverage the equity between all of them to make an investment somewhere else.
Rental Property Investor · Member since 2019 · 22 posts · 3 votes
7y
@David Pere what is the advantage of refinancing all three in a porfolio loan? I don't have an llc, all three properties are under my name. Two of the properties are under my VA loan which have excellent Interest at 3.25% and 3.35%
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
I would suggest something others don’t usually talk about .. instead of begging banks for money I would learn the art of creative financing . Why save forever and beg the money nazis at the bank for a loan . Go directly to the bank president and get the loan! - that’s the seller themselves