Olympia, WA · Member since 2016 · 15 posts · 0 votes
I am in the pre-qualifying phase with a lender. She is concerned that my debt ratio is too high. I own a single family home and two duplexes with a partner in an LLC. Our accountant showed a $200.00 loss for the duplexes this past year.
How are other people getting financing on a rental property when they already own several others? Do I need to take a tax hit and show income from the rentals in order to have a proper debt/income ratio?
I would love to hear how others are making it work.
I am in the pre-qualifying phase with a lender. She is concerned that my debt ratio is too high. I own a single family home and two duplexes with a partner in an LLC. Our accountant showed a $200.00 loss for the duplexes this past year.
How are other people getting financing on a rental property when they already own several others? Do I need to take a tax hit and show income from the rentals in order to have a proper debt/income ratio?
I would love to hear how others are making it work.
Many thanks,
George
A $200-dollar loss isn't that much at all so I would suspect that you have more income that can be uncovered.
Don't give up as you might be able to qualify. Use a broker or Loan Officer that has a lot of experience with Investment loans and that will increase your chances of getting something done and funded in the near future.
I was in your exact same situation before.... I have a handful properties in San Francisco and surrounding cities, each of which was at a cash flow loss upon purchase..... I wanted to buy more and DTI was too high, I was told so many time I could not keep track of....
Now, 8-9 years later, all properties are showing like $800 to $1200 cash flow per month per each property... and my DTI down to like 35% now.... So it is a waiting game.... I wish I had better solutions to tell you....
Investor · Mountaintop, PA · Member since 2013 · 110 posts · 57 votes
9y
If you are applying for, and being turned down for a convention loan, you will need to start focusing on commercial loans from portfolio lenders. These are typically small, local banks or credit unions. Their terms are a bit higher than a conventional loan, but the money is still green.
I am in the pre-qualifying phase with a lender. She is concerned that my debt ratio is too high. I own a single family home and two duplexes with a partner in an LLC. Our accountant showed a $200.00 loss for the duplexes this past year.
How are other people getting financing on a rental property when they already own several others? Do I need to take a tax hit and show income from the rentals in order to have a proper debt/income ratio?
I would love to hear how others are making it work.
Many thanks,
George
A $200-dollar loss isn't that much at all so I would suspect that you have more income that can be uncovered.
Don't give up as you might be able to qualify. Use a broker or Loan Officer that has a lot of experience with Investment loans and that will increase your chances of getting something done and funded in the near future.
Lender · Portland, OR · Member since 2015 · 87 posts · 31 votes
9y
@George Sharrett As @Bob Derwin mentioned, you'll need to start looking at portfolio lending. A mortgage broker will typically have a lot of different options, especially when it comes to non traditional financing.
Olympia, WA · Member since 2016 · 15 posts · 0 votes
9y
Our two duplexes do have a positive cash flow but we have been putting it all towards paying them off early. I have been thinking it would be good to have the full rent as cash flow when I retire. I am 56. At our current rate, they will be paid off when I am 68.
Our two duplexes do have a positive cash flow but we have been putting it all towards paying them off early. I have been thinking it would be good to have the full rent as cash flow when I retire. I am 56. At our current rate, they will be paid off when I am 68.
Is this a bad idea?
I dont see it as a bad idea for someone in their late fifties, maybe not the best way for someone twenty years younger.
I use commercial loans for all of my residential properties. No limit on how many loans. It is true, the rates are slightly higher, but the approval is based on cash flow of the property (DSCR) and not your DTI. My last loan was at 5.10%. They are typically 5 year balloon. I was able to secure 80% LTV based on the DSCR. Search for local banks not the large ones. Its a great strategy.
Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes
9y
Look into commercial loans and start showing more money; if it is not on paper then it does not exist. Most lenders, if not all, will not lend you money if you are showing a real loss. A commercial lender usually put back in depreciation and any other paper write-offs when running your financials. They look at your global financial picture to see if you are lendable and one bad investment can cause if an application to be rejected.
Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
9y
George Sharrett the premise of your post is hypothetical. You way find that your DTI is within range and this entire discussion would be moot. Keep in mind that when you bring a deal to the bank that is positively cash flowing that monthly income offsets the new monthly debt which will either lower your DTI or keep it around the same. So if you have a good deal and are on the cusp of that 49% DTI cap the bank will still lend if the property cash flows enough.
Best of luck to you.