Cash out refi, debt to income ratios and acquiring more loans

3 Replies

Hi all! We have a paid out rental that generates a net $1400+/mo that’s worth about $235k.

We want to purchase a $140k fixer we've identified by using a Cash-Out Refinance of $170k (30 for rehab). ARV is like $215-225k. Then we would hold it as another rental at appx $1500 gross monthly income.

QUESTION: If we borrow against House #1 to get a refi for house number #2 we are only qualified to assume so much more debt due to our Debt to income (we also have a loan on our current home we occupy, in addition to what's left on our car). So if we now have a loan house #1 and a paid off rental now on house #2, how can we get qualified to get another cash out refi for house #3 out of the re-assessed equity from #2 when we no longer have the DTI to qualify for #3 (due to the new debt from house 2 )??????

Thanks in advance!

Vicky,


If you currently have a rental that is paid for, you are carrying that through the whole "chain". The paid for home is just a new address each time. DTI is based on debt obligations versus the income to pay them. It sounds like your income is going to be increasing more than your debt each time. Also, as you buy additional properties, you can explore putting them into an LLC and refinancing with a commercial loan product. This will allow you to start over with conventional financing. There are several great resources on BP for scenarios like yours. Use the search function to see what others have done. Good Luck!

@Vicky Kalashian

Hi Vicky, usually you can use 75% of the estimated rental income and factor that into your debt to income ratio. So, this should help. Also, because you have a history of success holding onto real estate, you should be able to find a bank who will work with you. 

On another note, you could look into a hard money option or a non-recourse loan. If you have the income/collateral to put up for the loan, these can become reasonable options. 

Hope this helps!