Tips on how to get to your second investment property
Member since 2024 · 7 posts · 6 votes
Tips on how to get to your second investment property
Most Popular Reply
Melissa JusticeBusiness Member
Rental Property Investor · Phoenix, AZ · Member since 2024 · 518 posts · 1k+ votesFirst off - huge congrats on closing your first deal, especially on an owner-occupied duplex with just 5% down! That’s a solid way to house hack your way into the game, and it’s clear you’ve got the momentum and mindset to keep going.
You're not alone - many investors with student loans or early-stage mortgages face this exact challenge. The good news is: there are ways around DTI limits, and it doesn't always mean putting your investing on pause.
A Few Options to Explore:
1. Let the rental income help your DTI - even if it's not "seasoned"
If you’re living in one side of your duplex and renting the other, that rent can often be counted toward your income, depending on your lender and whether you’ve claimed it on your taxes yet. Some lenders will use projected rental income (from an appraiser's rent schedule) even if you haven’t been renting for a full year.
2. Look into DSCR Loans (Debt-Service Coverage Ratio)
These are designed specifically for investors and don’t look at your personal income or DTI - they look at whether the property can pay for itself (i.e., does the rent cover the mortgage and expenses). If you’re buying a turnkey cash-flowing property, DSCR loans can be a great fit, especially for those with higher student debt or irregular income.
3. Buy in lower-cost cash flow markets
You're already thinking turnkey - which is smart, especially if you're trying to scale with limited time or capacity. In Midwest and Southeast markets (think: Indianapolis, Birmingham, Cleveland, Memphis), you can find fully rehabbed, tenant-occupied properties for $100K–$150K, sometimes less. These often come with strong rent-to-price ratios and are a great match for DSCR or portfolio loan options.
4. Partner with someone
If you're open to it, consider bringing in a money partner or co-borrower for your next deal. You might handle the research, market selection, and operations, while they bring capital or stronger income/credit. Just be sure to formalize the arrangement!
Should You Wait and Pay Off Loans First?
Only if doing so aligns with your long-term goals and you’re not delaying your investing journey unnecessarily. You’ve already got great momentum. If you’re comfortably managing payments and there’s still room to take on another property using the right financing structure, it may be more powerful to use your capital to acquire income-producing assets instead of sinking it into low-interest debt.
That said, it always comes down to your personal risk tolerance and how much flexibility you want in your finances.
You’ve already done something most people never will - you took action and closed on your first deal. Now it’s about finding smart, scalable ways to keep growing despite the debt. You can do it, especially with tools like DSCR loans, turnkey rentals, and strong property management in the right markets.
Feel free to DM me if you want help comparing loan options or evaluating some turnkey properties — happy to help however I can.
Best of luck,
Melissa
15 Replies
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes1y
@Daniel Watson hard money lenders lend mostly on the value of the asset more than your credit. However they generally want money down and a value add property. They are short term loans until you can refinance (or sell).
DSCR lenders do the loan based on the income of the property however again they expect you to put up some funds generally 20%
Private lenders like friends family and associates can lend to you based on their trust and respect for you and the terms are whatever you can negotiate.
The reality is scaling without any money and expecting to do all your deals with no cash out of pocket is just not realistic. It can be done but it is quite rare. It also often entails much greater risk. You have made a great start. Good luck.
- 1yMelissa JusticeBusiness MemberRental Property Investor · Phoenix, AZ · Member since 2024 · 518 posts · 1k+ votes
First off - huge congrats on closing your first deal, especially on an owner-occupied duplex with just 5% down! That’s a solid way to house hack your way into the game, and it’s clear you’ve got the momentum and mindset to keep going.
You're not alone - many investors with student loans or early-stage mortgages face this exact challenge. The good news is: there are ways around DTI limits, and it doesn't always mean putting your investing on pause.
A Few Options to Explore:
1. Let the rental income help your DTI - even if it's not "seasoned"
If you’re living in one side of your duplex and renting the other, that rent can often be counted toward your income, depending on your lender and whether you’ve claimed it on your taxes yet. Some lenders will use projected rental income (from an appraiser's rent schedule) even if you haven’t been renting for a full year.
2. Look into DSCR Loans (Debt-Service Coverage Ratio)
These are designed specifically for investors and don’t look at your personal income or DTI - they look at whether the property can pay for itself (i.e., does the rent cover the mortgage and expenses). If you’re buying a turnkey cash-flowing property, DSCR loans can be a great fit, especially for those with higher student debt or irregular income.
3. Buy in lower-cost cash flow markets
You're already thinking turnkey - which is smart, especially if you're trying to scale with limited time or capacity. In Midwest and Southeast markets (think: Indianapolis, Birmingham, Cleveland, Memphis), you can find fully rehabbed, tenant-occupied properties for $100K–$150K, sometimes less. These often come with strong rent-to-price ratios and are a great match for DSCR or portfolio loan options.
4. Partner with someone
If you're open to it, consider bringing in a money partner or co-borrower for your next deal. You might handle the research, market selection, and operations, while they bring capital or stronger income/credit. Just be sure to formalize the arrangement!
Should You Wait and Pay Off Loans First?
Only if doing so aligns with your long-term goals and you’re not delaying your investing journey unnecessarily. You’ve already got great momentum. If you’re comfortably managing payments and there’s still room to take on another property using the right financing structure, it may be more powerful to use your capital to acquire income-producing assets instead of sinking it into low-interest debt.
That said, it always comes down to your personal risk tolerance and how much flexibility you want in your finances.
You’ve already done something most people never will - you took action and closed on your first deal. Now it’s about finding smart, scalable ways to keep growing despite the debt. You can do it, especially with tools like DSCR loans, turnkey rentals, and strong property management in the right markets.
Feel free to DM me if you want help comparing loan options or evaluating some turnkey properties — happy to help however I can.Best of luck,
Melissa
- Real Estate Consultant · Indianapolis · Member since 2019 · 75 posts · 80 votes1y
Quote from @Melissa Justice:
First off - huge congrats on closing your first deal, especially on an owner-occupied duplex with just 5% down! That’s a solid way to house hack your way into the game, and it’s clear you’ve got the momentum and mindset to keep going.
You're not alone - many investors with student loans or early-stage mortgages face this exact challenge. The good news is: there are ways around DTI limits, and it doesn't always mean putting your investing on pause.
A Few Options to Explore:
1. Let the rental income help your DTI - even if it's not "seasoned"
If you’re living in one side of your duplex and renting the other, that rent can often be counted toward your income, depending on your lender and whether you’ve claimed it on your taxes yet. Some lenders will use projected rental income (from an appraiser's rent schedule) even if you haven’t been renting for a full year.
2. Look into DSCR Loans (Debt-Service Coverage Ratio)
These are designed specifically for investors and don’t look at your personal income or DTI - they look at whether the property can pay for itself (i.e., does the rent cover the mortgage and expenses). If you’re buying a turnkey cash-flowing property, DSCR loans can be a great fit, especially for those with higher student debt or irregular income.
3. Buy in lower-cost cash flow markets
You're already thinking turnkey - which is smart, especially if you're trying to scale with limited time or capacity. In Midwest and Southeast markets (think: Indianapolis, Birmingham, Cleveland, Memphis), you can find fully rehabbed, tenant-occupied properties for $100K–$150K, sometimes less. These often come with strong rent-to-price ratios and are a great match for DSCR or portfolio loan options.
4. Partner with someone
If you're open to it, consider bringing in a money partner or co-borrower for your next deal. You might handle the research, market selection, and operations, while they bring capital or stronger income/credit. Just be sure to formalize the arrangement!
Should You Wait and Pay Off Loans First?
Only if doing so aligns with your long-term goals and you’re not delaying your investing journey unnecessarily. You’ve already got great momentum. If you’re comfortably managing payments and there’s still room to take on another property using the right financing structure, it may be more powerful to use your capital to acquire income-producing assets instead of sinking it into low-interest debt.
That said, it always comes down to your personal risk tolerance and how much flexibility you want in your finances.
You’ve already done something most people never will - you took action and closed on your first deal. Now it’s about finding smart, scalable ways to keep growing despite the debt. You can do it, especially with tools like DSCR loans, turnkey rentals, and strong property management in the right markets.
Feel free to DM me if you want help comparing loan options or evaluating some turnkey properties — happy to help however I can.Best of luck,
Melissa
Enlighten me on where these $100K to $150KK TK properties are located in Indianapolis? What kind of rents are these TK's getting?
- Investor · Indianapolis, IN · Member since 2015 · 270 posts · 217 votes1y
Quote from @Steve Lehman:
Quote from @Melissa Justice:
First off - huge congrats on closing your first deal, especially on an owner-occupied duplex with just 5% down! That’s a solid way to house hack your way into the game, and it’s clear you’ve got the momentum and mindset to keep going.
You're not alone - many investors with student loans or early-stage mortgages face this exact challenge. The good news is: there are ways around DTI limits, and it doesn't always mean putting your investing on pause.
A Few Options to Explore:
1. Let the rental income help your DTI - even if it's not "seasoned"
If you’re living in one side of your duplex and renting the other, that rent can often be counted toward your income, depending on your lender and whether you’ve claimed it on your taxes yet. Some lenders will use projected rental income (from an appraiser's rent schedule) even if you haven’t been renting for a full year.
2. Look into DSCR Loans (Debt-Service Coverage Ratio)
These are designed specifically for investors and don’t look at your personal income or DTI - they look at whether the property can pay for itself (i.e., does the rent cover the mortgage and expenses). If you’re buying a turnkey cash-flowing property, DSCR loans can be a great fit, especially for those with higher student debt or irregular income.
3. Buy in lower-cost cash flow markets
You're already thinking turnkey - which is smart, especially if you're trying to scale with limited time or capacity. In Midwest and Southeast markets (think: Indianapolis, Birmingham, Cleveland, Memphis), you can find fully rehabbed, tenant-occupied properties for $100K–$150K, sometimes less. These often come with strong rent-to-price ratios and are a great match for DSCR or portfolio loan options.
4. Partner with someone
If you're open to it, consider bringing in a money partner or co-borrower for your next deal. You might handle the research, market selection, and operations, while they bring capital or stronger income/credit. Just be sure to formalize the arrangement!
Should You Wait and Pay Off Loans First?
Only if doing so aligns with your long-term goals and you’re not delaying your investing journey unnecessarily. You’ve already got great momentum. If you’re comfortably managing payments and there’s still room to take on another property using the right financing structure, it may be more powerful to use your capital to acquire income-producing assets instead of sinking it into low-interest debt.
That said, it always comes down to your personal risk tolerance and how much flexibility you want in your finances.
You’ve already done something most people never will - you took action and closed on your first deal. Now it’s about finding smart, scalable ways to keep growing despite the debt. You can do it, especially with tools like DSCR loans, turnkey rentals, and strong property management in the right markets.
Feel free to DM me if you want help comparing loan options or evaluating some turnkey properties — happy to help however I can.Best of luck,
Melissa
Enlighten me on where these $100K to $150KK TK properties are located in Indianapolis? What kind of rents are these TK's getting?
I'll bet there are lots of doctors and nurses and lawyers over there probably pretty high.
- Member since 2024 · 7 posts · 6 votes1yThank you for such a detailed response, Melissa! I will look into all of this further and will shoot you a message if I have any questions or thoughts.
Quote from @Melissa Justice:
First off - huge congrats on closing your first deal, especially on an owner-occupied duplex with just 5% down! That’s a solid way to house hack your way into the game, and it’s clear you’ve got the momentum and mindset to keep going.
You're not alone - many investors with student loans or early-stage mortgages face this exact challenge. The good news is: there are ways around DTI limits, and it doesn't always mean putting your investing on pause.
A Few Options to Explore:
1. Let the rental income help your DTI - even if it's not "seasoned"
If you’re living in one side of your duplex and renting the other, that rent can often be counted toward your income, depending on your lender and whether you’ve claimed it on your taxes yet. Some lenders will use projected rental income (from an appraiser's rent schedule) even if you haven’t been renting for a full year.
2. Look into DSCR Loans (Debt-Service Coverage Ratio)
These are designed specifically for investors and don’t look at your personal income or DTI - they look at whether the property can pay for itself (i.e., does the rent cover the mortgage and expenses). If you’re buying a turnkey cash-flowing property, DSCR loans can be a great fit, especially for those with higher student debt or irregular income.
3. Buy in lower-cost cash flow markets
You're already thinking turnkey - which is smart, especially if you're trying to scale with limited time or capacity. In Midwest and Southeast markets (think: Indianapolis, Birmingham, Cleveland, Memphis), you can find fully rehabbed, tenant-occupied properties for $100K–$150K, sometimes less. These often come with strong rent-to-price ratios and are a great match for DSCR or portfolio loan options.
4. Partner with someone
If you're open to it, consider bringing in a money partner or co-borrower for your next deal. You might handle the research, market selection, and operations, while they bring capital or stronger income/credit. Just be sure to formalize the arrangement!
Should You Wait and Pay Off Loans First?
Only if doing so aligns with your long-term goals and you’re not delaying your investing journey unnecessarily. You’ve already got great momentum. If you’re comfortably managing payments and there’s still room to take on another property using the right financing structure, it may be more powerful to use your capital to acquire income-producing assets instead of sinking it into low-interest debt.
That said, it always comes down to your personal risk tolerance and how much flexibility you want in your finances.
You’ve already done something most people never will - you took action and closed on your first deal. Now it’s about finding smart, scalable ways to keep growing despite the debt. You can do it, especially with tools like DSCR loans, turnkey rentals, and strong property management in the right markets.
Feel free to DM me if you want help comparing loan options or evaluating some turnkey properties — happy to help however I can.Best of luck,
Melissa
- Real Estate Consultant · Ann Arbor, MI · Member since 2022 · 463 posts · 253 votes1y
Hi Daniel from Milwaukee, Wisconsin-
You bought a duplex last year with 5% down and conventional financing. You just graduated from your PhD program and are ready to get your next investment property but your debt to income ratio is skewed because of your student loans and ask how you might overcome this.
Great question! I would look into getting a Debt Service Coverage Ratio (DSCR) loan which uses the income from the property to qualify the loan and your credit score and less on you personally.
You may also be able to use a cash out refinance DSCR loan on your current duplex to get the cash you need for the downpayment on the next one.
To Your Success!
- 1yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
DSCR loans don't care about your debt load. They only care that the property can support the loan.
The challege is they require 20-25% down.
Logical Property Management4.9458 Reviews- Member since 2024 · 7 posts · 6 votes1yGood to know and consistent with the cursory research I was able to do on this type of loan—thank you!
Quote from @Drew Sygit:
DSCR loans don't care about your debt load. They only care that the property can support the loan.
The challege is they require 20-25% down.
- 1yCharles ClarkBusiness MemberReal Estate Broker · Milwaukee, WI · Member since 2020 · 306 posts · 209 votes
Congrats on your first deal — that’s a huge milestone! 👏 Many investors in your position explore options like house hacking, partnering on deals, or using DSCR loans that focus on property income instead of personal DTI. You might also look into seller financing or creative financing strategies. Paying off debt is always smart, but it doesn’t have to delay your investing goals if the right opportunity and structure come along. Keep going — you’re on the right track!
Raise the Standard RE LLC54 Reviews - 1yRyan RomingerBusiness MemberReal Estate Broker · Indianapolis, IN · Member since 2018 · 340 posts · 144 votes
Congrats on that first duplex! That’s a huge milestone, and doing it with 5% down on an owner-occupied deal was a smart entry move.
The DTI challenge is a very real one, especially for newer investors juggling a mortgage and student debt. Lenders weigh that ratio heavily for conventional loans, so yes — that can limit your options on paper, even if you're managing payments just fine in real life.
Here’s what I’ve seen others in similar situations do:
-
Look into DSCR loans — they’re not based on your personal income or debt but on the income potential of the rental itself. The terms are different (higher rates, more down), but for cash-flowing turnkey rentals, it could get you back in the game without waiting years to pay off loans.
-
Partnering up — you might not want to do this long-term, but sometimes investors team up with someone who has the DTI room or liquidity, and they structure the deal to share equity or returns. Just make sure the partnership is clearly documented.
-
Seller financing or creative structuring — not super common, but in certain markets or situations (especially if you’re buying from other investors), you can negotiate terms that don’t require traditional financing. Worth exploring if you're open to off-market leads.
That said, if your student loans are high-interest and you're feeling stretched, it’s also okay to pause and stabilize a bit. Building wealth through real estate is a long game — and you’ve already got a great start with that duplex.
Intrigue Real Estate & Property Management4.6285 Reviews -
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes1y
Sorry, but all of these suggestions come with a drawback that should be pointed out.
DSCR loans require at least 25% down on a duplex. And partnering up means at a minimum, that you own only half the deal, worst case you'll end up in a nasty RE divorce. And seller financing usually means you are overpaying for the property.
Buying your next duplex with an owner-occupied loan and 5% down is your best bet. If your DTI does not support that, you have to either change your debt or your income. Ideally both.
If you are young and don't have family, get a second job or start a business. You are only working 8 hours 5 days a week, so you've got at least 8h more every weekeday to do something else, plus the entire weekend. I know this sounds harsh, but I've been there: I was broke as a joke after my divorce and I believe that if there is a will you can find a way.
- Member since 2024 · 7 posts · 6 votes1yI appreciate the grounding here with the drawbacks. I have a couple of side hustles which help bring in a nice chunk of Income which I’ve been investing into index funds (while also putting some aside from my W-2). Seems like I will have to really focus on getting to 20-25% of a down payment to move forward then!
Quote from @Marcus Auerbach:
Sorry, but all of these suggestions come with a drawback that should be pointed out.
DSCR loans require at least 25% down on a duplex. And partnering up means at a minimum, that you own only half the deal, worst case you'll end up in a nasty RE divorce. And seller financing usually means you are overpaying for the property.
Buying your next duplex with an owner-occupied loan and 5% down is your best bet. If your DTI does not support that, you have to either change your debt or your income. Ideally both.
If you are young and don't have family, get a second job or start a business. You are only working 8 hours 5 days a week, so you've got at least 8h more every weekeday to do something else, plus the entire weekend. I know this sounds harsh, but I've been there: I was broke as a joke after my divorce and I believe that if there is a will you can find a way.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes1y
Quote from @Daniel Watson:
I appreciate the grounding here with the drawbacks. I have a couple of side hustles which help bring in a nice chunk of Income which I’ve been investing into index funds (while also putting some aside from my W-2). Seems like I will have to really focus on getting to 20-25% of a down payment to move forward then!Quote from @Marcus Auerbach:
Sorry, but all of these suggestions come with a drawback that should be pointed out.
DSCR loans require at least 25% down on a duplex. And partnering up means at a minimum, that you own only half the deal, worst case you'll end up in a nasty RE divorce. And seller financing usually means you are overpaying for the property.
Buying your next duplex with an owner-occupied loan and 5% down is your best bet. If your DTI does not support that, you have to either change your debt or your income. Ideally both.
If you are young and don't have family, get a second job or start a business. You are only working 8 hours 5 days a week, so you've got at least 8h more every weekeday to do something else, plus the entire weekend. I know this sounds harsh, but I've been there: I was broke as a joke after my divorce and I believe that if there is a will you can find a way.
For a duplex it will be 25% on an investment property you don't live in, 20% is only for single-family. Your best bet is to move in with 5% down. You can repeat that cycle every 12 months.
We currently still run on 8% appreciation in Milwaukee (I just pulled June numbers from MLS), not sure if it makes sense for you to spend a year on the sidelines saving up while the market could be lifting you.
Financially, it's not a matter of paying off OR investing. Better to fine-tune your approach and dial in the numbers. I would talk to one of our local banks proactively, get your financial picture looked at and then set the bar in DTI, down payment, reserves, purchase price as well as rehab budget so you are crystal clear on your goals.
- 1yCharles ClarkBusiness MemberReal Estate Broker · Milwaukee, WI · Member since 2020 · 306 posts · 209 votes
This is solid, no-nonsense advice — and honestly, it's the kind of perspective more people need to hear. The flashy creative strategies (DSCR, partnerships, seller finance) can work, but they come with real trade-offs that aren't always talked about. Owner-occupying with low down payment is still one of the most powerful, accessible moves out there—especially for beginners.
And you're absolutely right about the hustle. If building wealth through real estate was easy, everyone would be doing it. Sometimes the best ROI comes from investing in your work ethic first. Appreciate you sharing the raw truth!
Raise the Standard RE LLC54 Reviews - Lender · Ellington, CT · Member since 2024 · 210 posts · 103 votes1y
Hi Daniel,
You should look into DSCR programs. You'd likely be looking at 20% down and the main factors are going to be your FICO Score and the cash flow of the property. These will look at bank statements opposed to DTI or tax returns. You should expect a rate ranging from mid 6's to mid 7's and a 5-year prepayment penalty period. you can lower your rate by increasing your downpayment too.
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