What do I do if my DTI is getting in the way of my next investment property?

[Jordyn Ohs]

Good morning everyone. I am currently in the bit of a rutt. I have recently just purchased my 4th investment property all in my name and have accumulated a DTI of 45.9%. This is the max it seems most "A" lenders will loan too, I might get 50% from a credit union but that still probably not help in the short term.

How do people keep going? I know there's seller finance and "B" lender that are good for the short term, but if a balloon payment is due say in 5 years, there's no guarantee that my DTI would be in a better place then I'd be stuck without funding. I'm not sure if I'm simply over complicating this or not. I used a heloc to purchase the first 4 rentals, so $155k of dept is wrapped up In that until I refinance each property which have already appreciated extremely quickly given the current market. Would taking out a small business loan make sense st this point? I was going to wait to build my portfolio bigger before starting an numbered company, but I'd like to hear what the BP community has to offer in words of advice.

Here are the current numbers I'm working with. Thanks everyone.

Annual T4 income: 250K

380K in liquid investments.

Principle property est. valued at 670K with 250k left owing and 155K heloc attached.

Rental 1: purchased 2021 for 220K current est. value at 270K was a house hack with 5% down and $1600 monthly rental income.

Rental 2: purchased 2022 for 280K 20% down current est. value 345K rental is $2000 monthly 

Rental 3: purchased 2023 for 267K with 20% current est value 310K rents for 2100 a month.:

Rental 4: purchased 2024 for 240K with 20% down current est value 245K rents for 1800 a month.

I have no consumer dept, I only owe on my mortgages.

[Chris Seveney]

@Jordyn Ohs

You also don't say if these are cash flowing or not. You could convert them to a DSCR loan but then transfer them to a LLC

What we have done is save for down payments and renovation costs, - buy properties that need work rehab them and then refinance them out making sure it meets our dti. I don’t go above our dti because I don’t want the risk. I am perfectly fine holding X amount in real estate.

If I do see an opportunity another option is to lock it up and sell one of my existing if I think this property will perform or appreciate significantly more.

[Theresa Harris]

There are different types of loans or you simply wait for a bit and save up more money/increase your income/let the tenants pay down the mortgage.

[Jordyn Ohs]

Hi Chris, yes sll cash flowing. I'm a Canadian, there is no such things as an LLC here.

[Brian G.]

@Jordyn Ohs pay off/down your Heloc aggressively and/or look into DSCR loans for future acquisitions. Heloc's are best utilized with a short term strategy, ie flx and flip, to BRRRR, etc.

[Crystal Smith]

Quote from @Jordyn Ohs:

Good morning everyone. I am currently in the bit of a rutt. I have recently just purchased my 4th investment property all in my name and have accumulated a DTI of 45.9%. This is the max it seems most "A" lenders will loan too, I might get 50% from a credit union but that still probably not help in the short term.

How do people keep going? I know there's seller finance and "B" lender that are good for the short term, but if a balloon payment is due say in 5 years, there's no guarantee that my DTI would be in a better place then I'd be stuck without funding. I'm not sure if I'm simply over complicating this or not. I used a heloc to purchase the first 4 rentals, so $155k of dept is wrapped up In that until I refinance each property which have already appreciated extremely quickly given the current market. Would taking out a small business loan make sense st this point? I was going to wait to build my portfolio bigger before starting an numbered company, but I'd like to hear what the BP community has to offer in words of advice.

Here are the current numbers I'm working with. Thanks everyone.

Annual T4 income: 250K

380K in liquid investments.

Principle property est. valued at 670K with 250k left owing and 155K heloc attached.

Rental 1: purchased 2021 for 220K current est. value at 270K was a house hack with 5% down and $1600 monthly rental income.

Rental 2: purchased 2022 for 280K 20% down current est. value 345K rental is $2000 monthly 

Rental 3: purchased 2023 for 267K with 20% current est value 310K rents for 2100 a month.:

Rental 4: purchased 2024 for 240K with 20% down current est value 245K rents for 1800 a month.

I have no consumer dept, I only owe on my mortgages.

Some thoughts below:

1. My first reaction to your post is if you're purchasing assets that are throwing off positive cash but your DTI is going up then it may be time to re-evaluate the type of assets or the expenses associated with those assets.

2. Consider using DSCR loans- Cash flow of the property is considered in lieu of your income

3.Consider purchasing in a different asset class (Large multifamily) where borrowing will be a function o fthe property income, not yours