How to Finance 3rd property after DTI is maxed out

[Brad Scott]

Hey guys,

I started investing in real estate last year, purchased 2 houses by pooling savings with my brothers, which puts us at 3 properties with my current residence (renters in the other two). Our DTI is maxed and we're trying to figure out financing to purchase our first multifam now.

This seems to be a big wall people run into when starting out and a common question. What is the best financing option after DTI is maxed out?

Thanks so much for your help!

[Alex Bekeza]

@Brad Scott DSCR loans are the way to go. No DTI requirements whatsoever. Instead you can qualify for 30 year fixed financing using the subject property's cash flow. These are designed to help experienced investors scale beyond what Fannie Mae/Freddie Mac guidelines will allow for. Happy to chat in greater detail on these anytime.

[Eliott Elias]

Owner finance and subject to.

[Erik Estrada]

Quote from @Brad Scott:

Hey guys,

I started investing in real estate last year, purchased 2 houses by pooling savings with my brothers, which puts us at 3 properties with my current residence (renters in the other two). Our DTI is maxed and we're trying to figure out financing to purchase our first multifam now.

This seems to be a big wall people run into when starting out and a common question. What is the best financing option after DTI is maxed out?

Thanks so much for your help!

 I agree with Alex, 

If you have 20% down and don't mind a slightly higher rate, DSCR is the way to go.

You might want to consider a reduced prepayment penalty to make sure you can refinance as soon as rates start to drop. 

DSCR rates have been consistent for the past 8 months, right about 7-8.99%.

I also agree with Elliot. Owner financing is  a great way to get a property with putting little money down. I have heard of some instances where you can get away with 100% owner financing. 

These are short term loans for the most part, so I would have an exit lined up. Combining both owner financing and DSCR financing to take cash out and continue buying is a solid strategy.

[Jack Tulloch]

Hey Kelvin - as others have mentioned, DSCR loans are a great option for you. They are generally what investors "graduate" to after being capped out on conventional financing for DTI or loan limit issues. There are other types of financing available but DSCR loans are designed specifically for investors to scale. No DTI consideration, higher loan amounts, flexibility vesting to entities, lighter underwriting process, no hard cap on amount of DSCR loans you can get, and more. Congrats on getting to this point!

[Jay Hurst]

Quote from @Brad Scott:

Hey guys,

I started investing in real estate last year, purchased 2 houses by pooling savings with my brothers, which puts us at 3 properties with my current residence (renters in the other two). Our DTI is maxed and we're trying to figure out financing to purchase our first multifam now.

This seems to be a big wall people run into when starting out and a common question. What is the best financing option after DTI is maxed out?

Thanks so much for your help!

@Brad Scott    Are the rental properties cash flowing?  If so, they should not negatively be impacting your debt to income ratio. 

[Jamie Banks]

@Brad Scott Creative financing (subject to, owner financing, etc.) is the way to go. There's different ways to find sellers who are in situations that would allow creative techniques. There's tons of tired landlords who would prefer getting paid a set amount on a set term to spread out their tax liability versus selling the property, receiving the cash and then having a huge tax bill. One way to find these deals is to look through Zillow and search for retired landlords and/or families relocating, those situations usually have a higher chance of the seller being open to taking payments for their equity. I'd also try to find an agent who specializes in creative financing to guide you along. 

[Brad Scott]

Thanks everyone for the feedback! Super helpful. 

We are looking to move the current properties into a series LLC now. Would these lending options work the same with an LLC as th owner?

 @Jamie Banks and Eliott Elias how do you recommend finding an agent that specializes in creative financing?

And Eliott, do you have a group your get together with here in Austin? Thanks!