Getting Started & Debt Coverage Ratios

3 Replies

Hi All,

Me and a few friends are interesting in getting started in Buy & Hold real estate investing, but are still very much in the due diligence phase. Essentially, our long term goal is to pool together some money, and buy a few properties. 

What i was wondering about is the following: once we have purchased one property, that mortgage will be on all of our credit histories. Even if we are making all of our payments (which we will be), when we want to purchase a second property, we will be too overleveraged and a bank won't want to give us a second mortgage. I was wondering how people get over this hump - even for single investors. How can you secure a second mortgage for another investment when the first isn't completely paid off?

Thanks!! 

The answer is going to vary by lender and according to your individual incomes as well as the structure of the buying organization.  Having a W2 income makes it a lot easier.  As an aside, think about putting up a picture of yourself so we 'know' who you are, and welcome to Bigger Pockets.

Typically your dscr on a property needs to be 1.25 to be considered break even. So a PITI payment of $1,000 and rent of $1,250 is break even and that should not affect your dti. There are other qualifiers like your tax returns, so don't go nuts with deductions.

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