How to get from 1 door to more

Question

I was lucky enough to get into a rental about a year ago, but have been stuck trying to go up from there because of DTI. I’d like to go out of state because there are better markets but not sure how to get started. Any ideas or strategies to keep moving forward?

Logan Pemberton · Answer

@Jody Sperling I have thought about a HELOC, but I don’t have 20% equity and wouldn’t qualify. Also, are you suggesting to use the HELOC to pay down other debts? I haven’t thought of that before. Only using it to get in another property. Is there a way to prove rental income from my first property to counteract that debt? Otherwise my W2 job will never provide enough income for multiple properties. I’m sure there’s a way to scale up while still working full time. Thanks for your help.

Cal Dunagan · Answer

@Logan Pemberton

Have you ever looked at the Small Business Administration? It's a government organization that helps small business owners and has resources for loans. It might be something you're looking for. Here's a good BP article about the org. I also found a great article about some of the best and worst states for out-of-state RE investing, that might be helpful for you. Finally, there are a number of legal issues you're going to need to be wary of if you decide to invest out-of-state. Hope this makes sense!

Best of luck,

Cal

Logan Pemberton · Answer

@Cal Dunagan Thanks a ton for the articles they were super helpful. I have never heard of the SBA but I will definitely look into that more. How does an LLC go about purchasing a property? Would a bank look at my personal income from a W2 job still? Or would I purchase the property in my name and transfer it to the LLC? I’m pretty foggy on how it all works and what I’d need to qualify for a loan.

Jody Sperling · Answer

Good on you for trying to keep your question brief, but you were so brief, there's not enough detail to tailor a response to your specific situation. Good thing a generic response typically applies to this situation.

1. Save more than you earn. That will quickly address the DTI.

2. If you own more than 20% of any property, find a local bank to apply for a HELOC. Use the HELOC to chunk your least favorable debt. You won't have to change your lifestyle, savings or spending goals, and you'll drastically reduce your debt-load on that mortgage. In three-months time, by focusing on #s 1 and 2, you could be in a world of a different position.

3. Go around the banks and learn creative financing. If you want to scale fast, private-, hard-money and lease option is THE way to go.

Best of luck, whatever you choose to do! (Also, out of state is great, and be sure to build strong trust relationships if you plan to invest that way.)