Bank Financing hit a snag

6 Replies

Quick recap: I started investing a couple years ago and was able to acquire 5 rental properties. I used the BRRR method for all of them except the first one. Currently I have 2 refinance payments and one mortgage from my very first property - two properties are owned free and clear. The cash flow from my properties allow me to pay all of my bills so I've been maxing out my 403b/457 plan at work 38,000 for the past two years. By maxing out both retirement accounts it destroys my W2 income and my chance to ever try to get financing again. If I'm unable to raise money through my network how else could I get financing for a deal with no W2 income and a high debt to income ratio?

You should be able to add in your rental income (Schedule E) in addition with your W2 wage to increase that. You can also explain to the bank that you're getting income and have assets to cover yourself. I think you probably have to approach a Credit Union or local bank who will look at the holistic picture of your financial health rather than a large lender. They can sit down and figure out your DTI in a more meaningful way.

@Brian Williams

You can you use commercial lending. The approval process is based on the income/expenses of the property not your personal income. No seasoning and no DTI. The property needs to be owned in an entity like a LLC or other type. Interest rate is higher. DSCR of 1.25 or better. Loan might only be 5 years while amortization will be 20 or 25 years typically. It's another option in your toolbox.

@Brian Williams I’m not following the strategy of locking away 38k per year that you can not touch until 59 years old, instead of putting that money into real estate and snowballing your portfolio.  Also I’d cash out refinance the two paid off properties to also add to your real estate snowball. (Just my opinion)

@Michael P. The banks won’t refinance those other two properties because they say my debt to income ratio is too high being as my income is low. I max out the retirement account to help save money on taxes which in theory creates more money for me in the long run. 

@Michael Ohara I did not find an asset based lender. From what I was reading about LLCs I will have to season my LLC before being able to get a commercial loan.

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