I'm curious what guidance the investors in this community follow in terms of utilizing leverage. For most of us we need to use other people's money to build our real estate portfolio as we don't have money bags sitting in every corner of our house, waiting to be used.
I understand there is no one size fits all answer here but would like to know what other investors adhere to and why. How much debt is too much? Also, what have other investors experienced in terms of at what general point do banks stop lending because one's debt to income ratio is too high?
Looking forward to the community feedback!
Everything depends on your risk appetite. There are some investors who have less than 5% of their own money in their investments whereas others won't touch a property unless they have 20% down and only use bank financing.
When investors have too many mortgages where one's debt-to-income ratio becomes too large and doesn't allow them to qualify for more mortgages, they go to commercial lending. Commercial lending is based on the asset's income, not on your personal income. Multifamily that has 5 units or more is considered multifamily. The lender looks at the income that the property brings, property's cap rate, and your execution plan regarding the asset. They don't require you to have a minimum DTI or look at your tax returns.