I own a 2-family I bought as owner occupied.
Market value around $225k, I owe $179k.
I tried to get a loan for another 2-family as owner occupied. One bank wouldn't even talk to me unless I bought as an investment property, another said they would do the owner occupied.
Credit checked out but they only offered me a $75k loan because my debt to income ratio is too high. The properties I am looking at are around $220k.
They are basing their calculations on last year's tax return. Out of the $60k I made last year they only used $45k after deductions (showed a loss on the rental because of the initial rehab).
I am now renting both the units and with my job, my gross income is $85k.
But the bank is still looking at the $45k!
Can I do anything in this situation? Do I have to wait until next year so I can use 2014's tax return?
Welcome to the real world of real estate investing. Problems are to become an integral partner with you, traveling wherever you go and ever ready to show up at any hour. So, problem solving must become a priority in your investing education.
If you rely on banks to fund your loans early on, you will remain frustrated and at their mercy. If you wait until next year to buy a property due to income constraints, the lending criteria may change, interest rates rise, market may change (likely) and any number of factors that could stand between your ability to find the money you seek to buy another investment property.
Enter creative solutions. Hard money might get you part of money you need to initially acquire property. Buying subject-to existing loans is a practical way to buy property, especially if the seller is financially distressed. Working with a money partner could make sense, too. Learning ways to control property without ownership thru master leases and options, for example, could help you achieve your objective(s), too.
In short, you need more tools. You will learn to appreciate these problems and after assembling a large, multi-drawer tool chest, will happily find and work deals that others will not because you will know how to solve them.
Find a good local portfolio lender. Sounds like they are working with Freddie/Fannie money - best thing to do is find a small local bank that loans out their own money.
I have built up my portfolio with private money. You will have a lot less hoops to jump through when going private. But the cost is higher. You can either give up equity or pay a higher interest.
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