How do people have 10 properties in their own name?
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Jeff CopelandBusiness Member
Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votesMost people who can carry 10 loans and still stay below the DTI threshold are high wage earners.
It's also a tough balancing act for self-employed individuals: You want to minimize your reported income and maximize your business expenses for tax purposes; But you want to maximize your income and minimize your expenses for DTI/Lending purposes. You can't have your cake and eat it to, and sometimes you have to be strategic about how you structure your income taxes and pay down other debt in order to qualify for financing at the right times.
Copeland Morgan LLC4.770 Reviews
34 Replies
- Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes3y
The hardest part about getting to 10 properties in your own name is doing that while keeping your DTI below the max threshold. The lender will give you credit for some of your rental income as you have experienced, but it is pretty close to a wash after they do their underwriting.
How do you get to 10 properties in your own name when you've got a DTI issue? Increase your income, decrease your expenses.
- 3yJeff CopelandBusiness MemberReal Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
Most people who can carry 10 loans and still stay below the DTI threshold are high wage earners.
It's also a tough balancing act for self-employed individuals: You want to minimize your reported income and maximize your business expenses for tax purposes; But you want to maximize your income and minimize your expenses for DTI/Lending purposes. You can't have your cake and eat it to, and sometimes you have to be strategic about how you structure your income taxes and pay down other debt in order to qualify for financing at the right times.
Copeland Morgan LLC4.770 Reviews - Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3y
@Joel O. that only applies to conventional conforming loans not any kind of "portfolio loan".
For example, go to a local lender and they can lend to you using their own terms and loan products and because they are keeping those loans in their "portfolio" they can give you as many loans as they choose. They may have limits to the loans they wish to give to one person or LLC because they don't want all their eggs in one basket but then you just go to another local lender.
- Investor · Keller, TX · Member since 2019 · 76 posts · 62 votes3y
Quote from @Kevin Sobilo:
@Joel O. that only applies to conventional conforming loans not any kind of "portfolio loan".
For example, go to a local lender and they can lend to you using their own terms and loan products and because they are keeping those loans in their "portfolio" they can give you as many loans as they choose. They may have limits to the loans they wish to give to one person or LLC because they don't want all their eggs in one basket but then you just go to another local lender.
Dont those lenders usually have less favorable rates than the fannie mae loans? Thats why people say to try and get 10 if possible before portfolio.
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3y
Quote from @John B.:
Quote from @Kevin Sobilo:
@Joel O. that only applies to conventional conforming loans not any kind of "portfolio loan".
For example, go to a local lender and they can lend to you using their own terms and loan products and because they are keeping those loans in their "portfolio" they can give you as many loans as they choose. They may have limits to the loans they wish to give to one person or LLC because they don't want all their eggs in one basket but then you just go to another local lender.
Dont those lenders usually have less favorable rates than the fannie mae loans? Thats why people say to try and get 10 if possible before portfolio.
@John B., rates and terms vary a lot more with portfolio loans. Rate isn't always the most important factor when making a decision on financing.
As has been discussed above in part conventional conforming loans affect your DTI. So, those can even affect your ability to buy the primary residence you want later on.
Conventional conforming loans must be in your name not an LLC. So, you have the added cost of an umbrella liability policy to protect your assets.
A conventional conforming loan is a fixed thing but with a portfolio loan a lender you build a relationship might do loan modifications at your request. For example, I had an adjustable rate portfolio loan where the rate reset every 3 years. One year later rates dropped about 1.5%. For a $200 processing fee, I was able to get a loan modification to get my rate dropped early and save a nice chunk of interest. That wouldn't happen with a conventional conforming loan.
If you are house hacking and using loans intended for primary residences then conventional financing is great because you can buy with LOW down payments of 5% or maybe 3.5% with an FHA loan but only for a house hack really. Those kind of low down payments wouldn't be available with a portfolio loan.
- Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes3y
@Joel O., this is why investors love DSCR loans. As others have mentioned, if you're not a high-wage earner, issuing all ten conventional loans is highly unlikely especially as you take on more debt. To my understanding, DSCR lenders will still account for your credit score but do not look at the borrower's DTI.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes3y
10 land contracts, no DTI just Income:)
At number 10 and I hope you get there but by then you will be creative in figuring out ways to get that many properties.
- 3ySam YinPro MemberLos Angeles, CA · Member since 2021 · 583 posts · 738 votes
@Joel O.
Based on your OP, assuming even the 75% income credit... it would appear that your rentals are either losing too much money (based on standard underwriting) or you are shielding too much income in your tax filing.
If your 75% rental credit, for that specific rental you have is sufficient to cover the debt and operating costs, then that should technically not affect your DTI a bit. You then default back to your W2. And if you were able go qual with your W2 in the first place for that original property, then you can get another.
Obviously if you are a high income earner ($150k to $500k/yr+) and depending on where your are and what price range you are buying, none of this would really matter.
Back to the OP. Therefore, raise your rents so that the 75% is sufficient to cancel out that portion of your debt. If you cannot, then perhaps you have not been buying the most efficient property for your goals.
For example, if you bought a $200K SFR that carried a mortgage of $1000/month (PITI), AND you rented it for $1200/month. That is not gonna cut it. It should be rented about $1600 to $2000/month or even more. At the higher rent, that property will not affect your DTI and you can go get another. Work backwards and you will figure when to pull the trigger.
The above is a an actual example, not just scenario. I have done it with 11 SFRs (one was my primary) at one time and even refinanced them all at once at the same bank.
Also to the point of lenders, shop around. Small community banks can be a blessing. The above example was with a local credit union. Of the 11 loans (ranging between 5.1% to 6.75%), 1 was with EastWest Bank, 3 with Wells Fargo, 1 with Nationwide Lending, and the rest with the credit union. I refinanced all with the credit union when rates dropped to about 2.75%. That created even better DTI for more purchases.
But I got rid of them all immediately after.. that's another story...
- 3yJoel O.Investor · Charlotte, NC · Member since 2017 · 73 posts · 28 votesOP
Quote from @Jeff Copeland:
Most people who can carry 10 loans and still stay below the DTI threshold are high wage earners.
It's also a tough balancing act for self-employed individuals: You want to minimize your reported income and maximize your business expenses for tax purposes; But you want to maximize your income and minimize your expenses for DTI/Lending purposes. You can't have your cake and eat it to, and sometimes you have to be strategic about how you structure your income taxes and pay down other debt in order to qualify for financing at the right times.
Yes, I'm definitely realizing this.
I've been using a DTI calculator and messing with the numbers and easily understanding that.I did get a new job and the lender would not even consider that income as I haven't been with the company for 2+ years.
Totally forgot about that with conventional loans. - 3yJoel O.Investor · Charlotte, NC · Member since 2017 · 73 posts · 28 votesOPI actually did try working with a local lender, they did say they were using conventional loans though. Ill ask them about other options that are available.
Quote from @Sam Yin:
@Joel O.
For example, if you bought a $200K SFR that carried a mortgage of $1000/month (PITI), AND you rented it for $1200/month. That is not gonna cut it. It should be rented about $1600 to $2000/month or even more. At the higher rent, that property will not affect your DTI and you can go get another. Work backwards and you will figure when to pull the trigger.The above is a an actual example, not just scenario. I have done it with 11 SFRs (one was my primary) at one time and even refinanced them all at once at the same bank.
Also to the point of lenders, shop around. Small community banks can be a blessing. The above example was with a local credit union. Of the 11 loans (ranging between 5.1% to 6.75%), 1 was with EastWest Bank, 3 with Wells Fargo, 1 with Nationwide Lending, and the rest with the credit union. I refinanced all with the credit union when rates dropped to about 2.75%. That created even better DTI for more purchases.
But I got rid of them all immediately after.. that's another story...
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes3y
If you got a new job good luck on getting a loan if your plans are to buy real estate with conventional lending you really need all of your T’s crossed and i’s dotted it’s up to you but if your planning to scale you will eventually need to start creative financing it’s the fastest and I would say the easiest and cheapest way to get in on deals faster
- Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes3y
@Joel O. this has been said above but Ill reiterate that using DSCR loans allow you to buy more properties without affecting your DTI. DSCR loans can close in your personal name or LLC.
A DSCR loan, aka lite doc or business purpose loans, uses the rents you receive on the property and divided by the new loan PITI to receive a ratio. Simple math would be a PITI of 1,000 and rents of 1500. That would be a debt service cover ratio of 1.5. Basically, this property cash flows. FICO, experience, and LTV are also factors but this is the basis of the loan. No need for tax returns, Verification of Employment, or income. I have been through this loan as an investor myself and originate these loans all the time.
- 3yJoel O.Investor · Charlotte, NC · Member since 2017 · 73 posts · 28 votesOP
Quote from @Arsen Atanasovski:
If you got a new job good luck on getting a loan if your plans are to buy real estate with conventional lending you really need all of your T’s crossed and i’s dotted it’s up to you but if your planning to scale you will eventually need to start creative financing it’s the fastest and I would say the easiest and cheapest way to get in on deals faster
The conventional was for a primary residence, not an investment.
My main question was to determine how people are getting 10 properties in their own name without affecting their DTI.
Now I fully understand that they are mainly using non-conforming loans.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes3yAnyways you wouldn’t want all those properties and loans on your name not good for business nor to scale up. You might pay a little more in rate but this is asset investing and not a liability like your primary home unless your house hacking it then it becomes basically an asset but in order to do that you need to buy a multi or rent your rooms out etc…..
Quote from @Joel O.:
Quote from @Arsen Atanasovski:
If you got a new job good luck on getting a loan if your plans are to buy real estate with conventional lending you really need all of your T’s crossed and i’s dotted it’s up to you but if your planning to scale you will eventually need to start creative financing it’s the fastest and I would say the easiest and cheapest way to get in on deals faster
The conventional was for a primary residence, not an investment.
My main question was to determine how people are getting 10 properties in their own name without affecting their DTI.
Now I fully understand that they are mainly using non-conforming loans.
- 3yJoel O.Investor · Charlotte, NC · Member since 2017 · 73 posts · 28 votesOP
Quote from @Jonathan Taylor:
@Joel O. this has been said above but Ill reiterate that using DSCR loans allow you to buy more properties without affecting your DTI. DSCR loans can close in your personal name or LLC.
A DSCR loan, aka lite doc or business purpose loans, uses the rents you receive on the property and divided by the new loan PITI to receive a ratio. Simple math would be a PITI of 1,000 and rents of 1500. That would be a debt service cover ratio of 1.5. Basically, this property cash flows. FICO, experience, and LTV are also factors but this is the basis of the loan. No need for tax returns, Verification of Employment, or income. I have been through this loan as an investor myself and originate these loans all the time.
I mainly looked into HML instead of DSCR.
Definitely think ill look into those going forward to refinance into.
Ill definitely have to remove my loan out of my name (i did this to save on interest). Would refinancing out of my conventional into a DSCR really help? (assuming interest rates are similar)
- Investor · Keller, TX · Member since 2019 · 76 posts · 62 votes3yWhat kind of rates are you seeing for small multifamily 5-10 unit?
Quote from @Jonathan Taylor:
@Joel O. this has been said above but Ill reiterate that using DSCR loans allow you to buy more properties without affecting your DTI. DSCR loans can close in your personal name or LLC.
A DSCR loan, aka lite doc or business purpose loans, uses the rents you receive on the property and divided by the new loan PITI to receive a ratio. Simple math would be a PITI of 1,000 and rents of 1500. That would be a debt service cover ratio of 1.5. Basically, this property cash flows. FICO, experience, and LTV are also factors but this is the basis of the loan. No need for tax returns, Verification of Employment, or income. I have been through this loan as an investor myself and originate these loans all the time.
- NH · Member since 2016 · 56 posts · 73 votes3y
I don't think anyone here is using the DTI calculation correctly when it comes to investment properties.
There's a bit more to it, but here's the gist (I literally just went through this process w/ a lender):
Let's say you make $10k a month. That's your income.
Now let's say you have a SFH that you live in, at $3k/month. That's your debt.
So, your DTI is roughly 0.3
Now, you also have an investment property which grosses $5k and has monthly expenses of $4k. So, you net $1k. Take that net income, and add it to your income of $10k so $11k. Now your DTI is 3k/11k or 0.27
You DO NOT add the income and debt from investment properties to your DTI. In other words, even with a $10k/month w2, you can still scale to 10 properties if you are buying cash-flowing real estate.
Edit: One other note. When buying a new rental property, the lender will typically take 75% of the current market rent (confirmed by appraiser) into account in the DTI calculation. So, let's say the income is $8k they'd take $6k into account. If mortgage is $5k, then you should still be net positive on the DTI side. - Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes3y
@Joel O. try to quit claim out of your personal name into an LLC if your conventional loan allows it, saves on refi costs if the lender allows it. In my experience, conventional lenders usually do not but asking is free.
DSCR rates will be higher than your conventional loan but some, not all, DSCR lenders do not report to credit so your DTI would better for your next conventional loan.
- Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes3y
@John B. there isn't enough info to accurately quote out a MF 5-10 from your post but the rates I have seen are close to 1-4 DSCR rates, 7-9% depending on factors. What are the details on your deal? Happy to help if I can.
- 3yJoel O.Investor · Charlotte, NC · Member since 2017 · 73 posts · 28 votesOP
Quote from @Jonathan Taylor:
@Joel O. try to quit claim out of your personal name into an LLC if your conventional loan allows it, saves on refi costs if the lender allows it. In my experience, conventional lenders usually do not but asking is free.
DSCR rates will be higher than your conventional loan but some, not all, DSCR lenders do not report to credit so your DTI would better for your next conventional loan.
Would simply deeding the property out of my name to the LLC actually remove the DTI entirely? The loan itself would still be in my name but the property only would be in the LLC.
- Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes3y
@Joel O. even DSCR loan require whats called a warm bodied guarantor aka a physical person, to guarantee the loan will get paid.
As far as removing your personal name and replacing title with an LLC, its probable but like I said, not all DSCR lenders report to credit, but some do. It depends unfortunately. But if you were to refi, the process would be similar (replacing personal name and adding LLC). Quit claim would cost much less and accomplish the same goal.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes3yBe carful with this ask your lender if there is any acceleration clause, if you quick claim it or transfer the deed and you have this clause you will receive a nice letter in the mail to pay the loan amount in full:) also by just transferring your name on the deed doesn’t transfer the loan that was applied and approved under your name. The deed can be simple deeded to Santa Claus but the loan is approved by you. If you have a few properties I would look into a blanket loan and refi all of them under a business entity this way it removes all the loans off your name and the deeds get transferred as well 2 birds one stone. You will have to sign a personal guarantee but trust me I’ve done the same and later on when I ran my credit none of my properties showed up. If your a W2 that comes up, your income on your properties is up to you how you want to use that income 1099 to yourself or keep it in the account for business use and accumulate more property etc…..
Quote from @Joel O.:
Quote from @Jonathan Taylor:
@Joel O. try to quit claim out of your personal name into an LLC if your conventional loan allows it, saves on refi costs if the lender allows it. In my experience, conventional lenders usually do not but asking is free.
DSCR rates will be higher than your conventional loan but some, not all, DSCR lenders do not report to credit so your DTI would better for your next conventional loan.
Would simply deeding the property out of my name to the LLC actually remove the DTI entirely? The loan itself would still be in my name but the property only would be in the LLC.
- Rental Property Investor · Houston, TX · Member since 2014 · 139 posts · 140 votes3y
A property can mean a condo unit, sfh, th unit. So you can buy a multifamily with multiple units like a duplex or 4plex. My understanding is you can have a max up to 10 loans under your name. So if you want to get to 10 properties, buy two 4-plexes and a duplex. And with these, your DTI is typically much lower.
- Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes3y
@Joel O. I’ve got 10+ properties in my name. I’m not sure what the question is, but feel free to PM me.
- Rental Property Investor · NY · Member since 2017 · 132 posts · 90 votes3y
@Joel O.
Commercial banks allow you to place commercial mortgages in your name not just an llc
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