20% or 25% Down - Investment Loan w/ Lower Taxable Income??

Question

Hi! Can anyone advise in the PA, NJ or FL RE markets re: getting a loan for either 1-4 units or more without having a large, taxable income shown on tax returns? My taxable income has significantly dipped due to childcare reasons but my rental income from my rentals have subsidized this loss for the most part. I'd like to acquire another property soon and put ideally 20% down, however I am concerned that my income won't provide borrowing power lenders want? I know when I purchased my various properties a few years ago, I was told by my previous broker as long as the property is intended to be rented for an amount that will cover the mortgage, taxes and general expenses, my personal income would not be a concern and I'd be fine for borrowing. I'm wondering if this is still the case. Please advise. I'm trying to sell a townhouse from my small portfolio and reinvest the money I hope to cash out with, I'm getting concerned I won't be able to do so. Thanks!

Sunny G. · Answer

Mandee, just PMd you, look forward to you closing this and good luck !

Mikael Winkler · Answer

@Mandee H. You may already be doing this, but I would look at the smaller, perhaps local, lending institutions. They may be more willing to work with you if your DTI isn't ideal. You're less of a rinse and repeat formula to them than you may be working with a larger bank haha

Basit Siddiqi · Answer

@Mandee H.Lenders have guidelines before they are willing to give you a loan.The main hurdles are1) Credit score2) DTI Ratio3) Down paymentIf you pass all of the above, they should give you the loan. It looks like the issue you may have is the DTI Ratio. Do you know what your DTI ratio is?The ultimate way to know whether you qualify or not is to talk to more lenders.

Mandee H. · Answer

Thanks John! This is good to know, starting to feel better for sure! If you know a lender, recommendations welcome.

Mandee H. · Answer

Thanks @Kyle Altenau - sounds encouraging! Can you recommend a lender or broker? Also, have you found it's harder to get a 20% down loan versus 25%? My broker seems to always only offer us 25%. Thanks!

Kyle Altenau · Answer

If you're sticking strictly to multifamily investing in the NJ, PA area, things haven't changed too drastically. We have been able to get a ton of deals done throughout Covid and at some great rates/terms. Depending on what kind of other terms and structure you are looking for DTI may or may not be a big factor. Regardless, if there is a high DSCR, you'll have SOME kind of options. It's just a matter of how good it is.

I don't work in FL as frequently, so I can't speak to terms down there.

20% or 25% Down - Investment Loan w/ Lower Taxable Income??

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