Buy and hold rentals
I am a retired woman investing in buy and hold real estate. I own 2 townhouse rentals and am house hacking on my primary house. I would like to buy another rental property but am having trouble with the debt to income ratio required by conventional loans. I have talked to a DSCR lender and their rates are currently around 10% which seems crazy to me. I have the 20% down, a high credit score and a good tract record. My problem is finding financing that works for me. Does anyone have any suggestions?
@Barbara Bergen- is the lender inclusing the rental income from your townhomes ? are they using the figures off your tax returns or are they accepting 75% of monthly lease amount ? Do you have any other income or debt?
My income is social security and the rent from my 3 tenants. My rent collected covers the mortgages on my 2 townhouses plus my primary home and cash flows $331/mo after all 3 mortgages are paid. I have no mortgages to pay and no debt. I only use one credit card which I pay off every month. When I pulled my credit score through Experian on 10/17/22, my Fico score was 826. One broker which I have used in the past wants 25% down on investment properties which is too much. I have budgeted around $45,000 for a 20% downpayment. I can make the numbers work on an investment property up to $220,000 if I could find financing at 7% or below. There is a half duplex that came on the market today which I would be interested in but don't want to waste my time if I can't get any financing. The answer to your first 3 questions is yes. Thanks for your reply.
Quote from @Barbara Bergen:
I am a retired woman investing in buy and hold real estate. I own 2 townhouse rentals and am house hacking on my primary house. I would like to buy another rental property but am having trouble with the debt to income ratio required by conventional loans. I have talked to a DSCR lender and their rates are currently around 10% which seems crazy to me. I have the 20% down, a high credit score and a good tract record. My problem is finding financing that works for me. Does anyone have any suggestions?
Hey Barbara,
10% is pretty high for a DSCR loan. I am seeing high 7% to low 8% on a 5/1 interest only ARM and high 8% on a 30 year fixed.
An interest only ARM scares me. I could make something work at 8% on a 30 year fixed - but no higher. I might just have to wait and see what this market does.
There are still options out there for under or around 8% on 30-year fixed terms. Where is the property located?
Olathe, Kansas
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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Can do commercial lending, their rates are low but only amortize over 20 years
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#1 Creative Real Estate Financing Contributor
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The problem you are likely having with DSCR loans is that Kansas is one of the few states that outlaw prepayment penalties on rental properties, so DSCR lenders can only offer loans with no prepayment protection, which results in the much higher rates (Prepayment Penalties are a key tool for DSCR loans to give rate relief). A rough example of gov't regulation actually harming the people it is purportedly supposed to help.
