Creative financing help needed

[Bre Reichle]

Hey Guys. Here's my scenario:

I have a rental property that has recently started generating net $21,600/yr with energy of around $300,000

I have another property under rehab that will be ready by the first of year that will generate around $15,000/yr with an energy of around $152,000. 

I am not a W-2 employee. My only income are the properties. 

I would like to invest in a multi-family (duplex) next year. 

Are PMLs my only option? 

Thanks for all the help <3

[Charles Granja]

Quote from @Bre Reichle:

Hey Guys. Here's my scenario:

I have a rental property that has recently started generating net $21,600/yr with energy of around $300,000

I have another property under rehab that will be ready by the first of year that will generate around $15,000/yr with an energy of around $152,000. 

I am not a W-2 employee. My only income are the properties. 

I would like to invest in a multi-family (duplex) next year. 

Are PMLs my only option? 

Thanks for all the help <3

 Hi,

You should be able to use some of that income to qualify you for the multi-family if you have rented them for 2 years. Otherwise, the current leases will negate the debt service and not affect DTI that comes from W-2. When you are buying next year, if you find a duplex that has an existing tenant, they can use 75% of the income to help qualify you for the property. Another way you can invest with no W-2 is DSCR loans but they aren't worth it for you and technically you aren't supposed to live there but I don't know all of the stipulations.

[Chris Tarashuk]

There is always the option of partnerships as well.  Because you have 2 properties under your belt you can leverage that experience.  It may cut into how much cash flow you make off the property but it is commonly said on BP Podcasts that the best way to expand is through partnerships.

[Bre Reichle]

Quote from @Charles Granja:

Quote from @Bre Reichle:

Hey Guys. Here's my scenario:

I have a rental property that has recently started generating net $21,600/yr with energy of around $300,000

I have another property under rehab that will be ready by the first of year that will generate around $15,000/yr with an energy of around $152,000. 

I am not a W-2 employee. My only income are the properties. 

I would like to invest in a multi-family (duplex) next year. 

Are PMLs my only option? 

Thanks for all the help <3

 Hi,

You should be able to use some of that income to qualify you for the multi-family if you have rented them for 2 years. Otherwise, the current leases will negate the debt service and not affect DTI that comes from W-2. When you are buying next year, if you find a duplex that has an existing tenant, they can use 75% of the income to help qualify you for the property. Another way you can invest with no W-2 is DSCR loans but they aren't worth it for you and technically you aren't supposed to live there but I don't know all of the stipulations.

 Thank you so much for the guidance. I will try and locate a duplex with renters already present. That will be a big help. It has only been 6 months for that income and I do not live in either property. So, two years before I can tap into that energy? Ugh! :( 

Again, thank you so much. 

[Bre Reichle]

Quote from @Chris Tarashuk:

There is always the option of partnerships as well.  Because you have 2 properties under your belt you can leverage that experience.  It may cut into how much cash flow you make off the property but it is commonly said on BP Podcasts that the best way to expand is through partnerships.

 Ahhhhhh! yes! Thank you for that idea :) 

[Marty Johnston]

@Bre Reichle you also have DSCR loan products to help you out which won't at all look at personal income, so DTI isn't even a factor considered. It will be solely based on the performance of the property you're looking to acquire, calculated as the Debt Service Coverage Ratio. Most DSCR loans like to see anywhere from 1.0 to 1.30 DSCR. (simplified, a 1.20 DSCR means for everything $1,000 in PITIA, you earn $1,200 /mo in gross rental income from the subject property).

Now many DSCR lenders may want to see prior experience, some don't! The downside to these lenders are rates are higher than banks. The benefit is no income paperwork. So if DTI is an issue, DSCR is the way to go. If you look good on paper with tax returns, Sch E (in your case), etc, then the bank will be your best friend and get better rates/lower costs.

Hope this helps!

[Bre Reichle]

Hey, thank you so much!

[Eliott Elias]

Why not seller finance them?