MORE MORTGAGES!!!! But How?

Question

Hey, new to the group and first time poster, long time Bigger Pockets follower.

My wife and I have been investing in real-estate for 8 years and are getting to a point where we are going to start capping out the number of mortgages that we are allowed. Current mortgage broker is good for 11 total lines (primary residence +10) how can I exceed this? is this going to a smaller local lender? is this going to private money? or are we at a point where we have to refi to pay a property off to free up a mortgage line? Even with current rates (6.5-7.5%) we are still acquiring profitable properties and would like to continue to do so but this is the next foreseen roadblock and I would like advice on how to overcome it.

Melissa Nash · Answer

Any non-conventional lender will help you. yes, rates are much higher. The strategy that I recommend is when the rates are low use NON conventional loans and when rates are high only do conventional loans. So while you don't have a lot of choices right now--- if/when rates drop take your conventional loans and do a portfolio loan or something like that and take all your properties into 1-2 loans. Then that opens up the spots again for when rates go up again.

Also you and you wife get 10 each per name. Is her name on all the loans? Hopefully not. try not to put both names on the loans. If she is on all of them- you are out of luck for the golden ticket loan.

Stacy Raskin · Answer

@Alex Kreuzer, DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

4. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit.

I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350, Insurance = $100, Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250, Insurance = $100, Association Dues = $25

Total PITIA = $1875 Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

Alex Kreuzer · Answer

Thanks Ash! that is very helpful. We are assuming this is the, "good problem to have" and want to start shopping/building a relationship for that next appropriate lender before we start missing deals.

Ash Hegde · Answer

The next step would be DSCR loans. They are going to have higher fees and rates than conventional, but that's part of the cost of growing your portfolio. Qualifying will be based on the rents of the property vs the mortgage and will not include your personal income. If your current mortgage broker doesn't have this product, many lenders here on BP do.

Jeff Prow · Answer

You could actually just use a portfolio product to work around the amount of mortgages.

Erik Estrada · Answer

Hey Alex,

Sounds like DSCR loans and Bridge loans are your next step. These loans have no limit and qualify you based on the performance of the property, no DTI required.

You can also look into seller financing or combining both methods (some DSCR lenders allow subordinate seller financing.).

Julio Burgos · Answer

Alex,

Your next step are DSCR loans, they focus on the property itself and not your credit nor how many mortgages you have.

I am a mortgage broker and I help investors to get all kind of financing that fits their needs, lets connect and we can talk more about your options!

MORE MORTGAGES!!!! But How?

Most Popular Reply