Small Multifamily BRRRR Financing and Credit Scores

[Rivers Plowden]

Long time since I've been on here due to a recent move and job change or sorts. 

To start off, we bought a house in 2010, lived in it for 3 years and moved. We have been renting it out successfully ever since. Most recently, we refinanced out of the VA loan that it was initially under in order to purchase our current residence. I'm covering expenses at this point and letting the tenants increase my equity. My initial plan was to just hold it and sell it in approximately 10 years to help pay for kid's college expenses. However, in the last couple of years I have replaced all the major systems and renovated the master bath and feel like now would be a good time to sell while all those pieces of the puzzle are new.

I would like to roll the profits into a small multifamily BRRRR strategy. I have a few questions as to the nuances of the financing:

How do you get around the debt/income ratios when your portfolio gets past the first few properties and you need to finance the next or if you need to go out and purchase something else on credit?

I would most likely put these properties under an LLC, but since it's a pass-through entity, it won't save me from the above. Is a commercial non-recourse loan an option? How hard is that to find?

I would imagine all the debt doesn't do your credit score wonders... 

Any insight into this would be greatly appreciated.

[Lee Ripma]

You can only get a commercial loan if you're holding title in an LLC. Commercial lenders to look at you but they don't care about DTI ratio like residential lenders do. Loans under 1M are rarely non-recourse, so you're looking at recourse with a personal guarantee if you get a commercial loan under 1M. You could always max out your residential mortgages before moving on to commercial. I hate residential lending and I get commercial loans on my properties, even if they are under 5 units. Commercial loans are held in LLCs so I haven't seen any effect on my credit score from having them. I don't think the lenders even run your credit when you take out the loan. They are mostly looking at the asset and you but not in the same way that a residential lender is looking at you. They want to make sure you don't foreclose, they hold the note on their books.