All Forum Posts by: Jeff Brower

Zillow is always a good place to start. Also loopnet is a good place to research commercial properties, though I have heard that good deals are hard to come by on that site. As far as research goes I would start in this forum category and read back as far as you can. You will get a lot of information from previous posts. If you are just starting it is recommended to start small (2-4 units) as the financing is residential as opposed to commercial. Lower rates and better terms. Plus if you apply for commercial (5+ units) the lenders like to see previous landlord history. Not saying that you cant start big though, it all depends on your resources. You're definitely in the right place to learn!

Hello All,

I am just about to purchase my first SFR or MF buy and hold long term. I have done some searching on this topic and haven't found much so that is why I ask.

I would like to know what most of you would do in this situation. After two years of history on my W2's I will need to use the income from the property to increase my DTI ratio in order to qualify for more future loans. Even though this is the case I know that the first year of owning a property includes most of the initial expenses that can be used to claim a loss in order to offset revenue taxes. What are your thoughts? I am leaning towards not claiming any costs in order to maximize my claimed income to minimize my future DTI.

Does the bank average the income from the first two W2's? If they only take the second year into account then maybe it would be best to claim a loss the first year and a gain in the second. My local credit union told me that that they need to use the lesser of the two previous W2's for my income; in this case I would want to maximize income for both years.

What have you all done and how has it worked out to minimize your future DTI ratio?

Thanks!

A Heloc can be used, but keep in mind that it will negatively affect your DTI (debt to income) ratio. If you take out a heloc to use as a down payment for a loan, this may put you over the max dti for the lending institution to qualify for the loan itself. Once given, they will use the maximum amount of the line of credit against you on your dti ratio, even if you haven't borrowed a cent.

@Lynn McGeein nailed it.

Some banks differ with the 2 year rule. Some want to see 2 years tax return history in EACH property to count the 75% towards your DTI. Some only want 2 years experience in general and will count it like Lynn said above (proof of signed lease and income being generated) If you plan on staying with one bank for a while you will want to ask this question before obtaining your first loan with them.

I do believe so. Though I think that there may be some variations depending on the local PHA.

good post. yes, most banks have additional overlays that restrict them to a 4 maximum. If pointing a broker or lender to a link it would probably be better to source them directly to the fannie website as opposed to an article. the link below is what I would point them to. though if they already told me that their max is 4 then I would just assume that it is an additional overlay. Good work on your part doublechecking with the second broker!

https://www.fanniemae.com/content/guide/selling/b2/2/03.html

http://www.huduser.org/portal/datasets/fmr/fmr_il_history.html

take a look above at the link which will give your FMR for any county. compare this to what you might find on craigslist ads for rent. lake county ohio (30 mins east of Cleveland) is comparable for section 8 vs non- section 8.

Cleveland Suburb in Lake County Ohio. I was able to get my assessment dropped from 138k to 80k but I was lucky and had a purchase price of 75 and an appraisal of 85 that was only 15 months old. Didn't have to submit any comps. They accepted my proposal of 80k over the mail, didn't even have to show up. Great move on my part, saved me about $120 per month on my payment.

Keep in mind that the heloc will negatively affect your DTI ratio. You want to be sure that the heloc monthly payment added to your projected investment property monthly payment do not make your DTI ratio exceed the maximum for your investment property lending institution (normally around 43% back end for most banks if I am not mistaken). I believe that the norm is for the lender to use the heloc maximum draw amount minimum payment.