Financing My second Deal

[Aaron Murphy]

Hello,

I have some questions about how to get bank financing for my second home purchase.

I am currently house hacking in a 5 BR house. I purchased the property with an FHA loan. I would like to now move to a new home that I purchase with home owners financing and house hack again while managing the other home as purely a rental property. It is my understanding that I cannot have two FHA loans at the same time. However from speaking with my lender I have the ability to purchase a different home using a conventional personal residence loan product. He said that I can do this while still keeping my FHA loan. While I can utilize the rental income from the home that will purely be a rental to offset some of my debt for the debt to income ratio I am frustrated by the price limitations that the inability to count the entire signed leases as offsets against the mortgage. I have heard it said on the podcast many times that bank financing can be used typically on up to 10 properties and I am having trouble seeing how to use it for 2 let along10 so I feel that I may be thinking about this the wrong way.

are there certain loan products that I am missing that would allow more flexibility for income offsets? Does the 10 properties idea merely apply to extremely high income individuals? Are the rules different if I am buying outright as an investment property instead of as a house hack scenario? I have also considered going the route of a NACA loan since it is based on monthly cash flow instead of the rigorous 2 year figures that banks require which would let me utilize more of my income for the projections. Any insights from the community would be much appreciated.

for context the first house cost 340k , the monthly payment I can qualify for on the second home is ~1800 . My current income is around 98k however because I work in sales and they require a 2 year average I demonstrate an income closer to 76k.

Outside of what the issue is for this property I want to understand the mistake that I am making in general so that I can begin to plan for the 3rd property after this one and the ones that follow that.

[Aaron Murphy]

Originally posted by @Darian Richardson:

@Aaron Murphy I am currently in a similar situation where I am trying to sort out financing for my second deal without going down the road of 20%. How did things end up going with your second deal?

Darian,

I did not end up solving the problem that I was trying to. I did end up moving forward with a second deal and then a third. I purchased the second deal using 20% financing by looking in a less expensive market that is around 1.5 hours driving from the first house. I purchased the 3rd deal using a Land Contract which seems to be a form of seller financing. This Land contract route seems like it will be the best avenue for me to get around the ways the lenders I have spoken to evaluate income but I from studying them I believe they carry more risk if the individual providing the land contract has a risky financial outlook.

I did not find another loan product that solved the issue but was able to purchase more deals by going outside the owner occupant financing structure that I originally intended to.

Hope this helps