Guys/Girls, I really need help.... I recently quit my job to do real estate full time. I'm about to have my RE license, and we also have an LLC with our property income flowing through it. So My wife makes $60,000+ at her job and we also have 3 cash flowing rentals. These rentals don't just cash flow a few hundred, they cash $1000+ Profit each and every month like clock work. Each one was house-hacked. Bought one, lived in it for a year, then bought the next one and then moved. Its been a year + a few weeks now so we are ready to get the 4th. So I talk to my broker to get the standard pre-approval letter, and she cant give me a loan for anything, saying that our DTI is 128%. I've tried a dozen banks and they all say the same thing. What is happening is that because the last house we bought doesn't have 2 years worth of rental income, they have to count that house mortgage against us, but don't count any of the rent. So in a nutshell, my 3 incredibly profitable cash flowing rental properties are killing me in getting another mortgage. This doesn't make sense to me, and I'm stuck. Without my income from my job, her income is not enough to be able to get us the 4th mortgage. On top of that, everyone is telling me I need 2 years of self employment income before that will count for purchasing power, and the creation of the LLC is trapping me to where lenders wont count rental income. Nobody seems to want to lend for a new business. Is there anyone who can provide me with any sound advice on how to move forward? I could just sit on my hands and wait 6 months for my properties to pull in enough cash to put a down payment on a house, but I want to go go go. So my question is as follows: How do I "Afford" to get my next mortgage? I want to HELOC my house which I can take out $50,000 to buy an investment property, but they require income verification for that too. A business needs 2 years of income to get a business loan. I really seem to be stuck between a rock and a hard place, and I'm determined to break out. Help is appreciated, Matt Nico

@Matt Nico Ask your boss for your job back.

@Matt Nico You can use commercial mortgages. Need the property to be owned in an entity, not your personal name. They do not use DTI to qualify. They look at your DSCR , must be a minimum of 1.25. If the property cash flows then you will be approved. Contact local banks in your area. You will pay a higher interest rate, but it’s an option. I have many commercial loans for my rentals.

@Matt Nico It’s actually way easier than that. All you have to do is 1) pay to have a quit claim deed (cost varies by state and county - check out the county’s website for more info), 2) submit a notice of change of ownership to each tenant/unit in the property, and 3) inform the tenants to start making payments to the LLC instead of you.

@Matt Nico Not if you specifically use a quitclaim deed. Its only purpose is to transfer ownership of the property, not the note. A quitclaim deed doesn’t show any intentions to transfer the note. It assumes, legally, that the persons on the note will continue to be responsible for mortgage payments.

Call @Melvin List. He is in Florida. He will EITHER tell you "yeah you're good to go, these clowns are clowns," or he will tell you what is "really" going on so you can adjust aim and fire for effect. Either way, you win.

@Matt Nico This is kinda where it gets complicated. It’s nice to have a relationship with a lender so they know your situation. The title being in your name and the payments being made in the name of the LLC are enough evidence to show the lender that you are not getting that income and paying those expenses, your business is. The mortgage will still be in your name, but it’s still up to the lender how they want to consider those numbers financially. They have the ability to manually separate business debt from personal debt if they choose to. There is the option of completely refinancing the note and putting it into the name of the LLC that way, but as it was mentioned in your initial post, and again throughout here, it’s not the best option because there are many regulations you have to abide by. And the rates are usually higher.

You need to work with a broker or loan officer that has experience in getting investors approved. What state are you looking to do business in?

Cant get financing with 3 cash flowing properties + a job. Why?

Matt Nico

OP

Member since 2019 · 448 posts · 306 votes

6y

Originally posted by @Frank Chin:

Matt, I was in your shoes some time back. My wife and I had two good paying W2 jobs in the 1st case, and I had a business in the second case. Short story, I got my mortgages. I was a credit manager involved in credit and lending in the commercial area and understand the world of ratios, like DTI, how it's applied, how rules are bent.

Frank,

Thanks for taking the time to share your story with me. It does sound like we were in a similar situation. I have looked into the no Doc loans many times. Lenders are actually more than willing to give them to me. The problem I have is when I go to get a live-in mortgage. I'm looking for the 5% conventional where I can live in it and flip it, but they wont approve me for the mortgage. I agree I need to establish a relationship with a local bank, I'm just having a difficult time finding one.

Cant get financing with 3 cash flowing properties + a job. Why?

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