Rental Property Investor · Baton Rouge, LA · Member since 2018 · 151 posts · 13 votes
Are there any RE investors who are going through the single family home route?
So I am fairly new to REÍ and I have been taking the Single family home route. This takes a bit longer, but the properties typically go up in value a lot faster, are easier to rent, and you get more out of them. I bought my first Investment home back in 2015 and It has been a success for the last 2 years. I would like to keep going this route, but struggling to get loans. My credit score is great (770), I have enough for another down payment (20%) but lenders still can’t lend because I have around 230k in debt from the other home. I make 105k/year so my debt to income ratio is borderline.
My plan was, and had always been to buy a new single family home every 3 years of around $300k,rent it for around 1600-2000/month. Repeat.
I guess my question is how do you guys do it? What is your plan to success? Am I buying too soon? Am I doing anything wrong?
Rental Property Investor · Dayton, OH · Member since 2017 · 48 posts · 68 votes
7y
I think the problem would be that purchasing a home for 300k and only renting it out for 1600-2000/month would crush your DTI ratio. Single family rentals work, but a low DTI ratio will make it harder to get loans.
SFH investing is a very expensive route to success. It depends almost entirely on appreciation and is a much higher risk for investors. It is very difficult to achieve positive cash flow long term and ROI is generally low. It is higher risk with the potential of greater rewards but does require much deeper pockets to succeed. Equity is always at risk.
They are primarily an appreciation play best used by investors with considerable cash reserves. The route to success is more difficult since the pay off does not come until the very end. A major dip in the home owner market can and often does wipe out a large portion of equity.