Rental properties affecting DTI

[Anthony Rondinelli]

Hi,

If I want to maintain a healthy DTI for a primary residence conventional loan in a couple years, what should I be aware of, or what strategies must I employ? My current W-2 and rental income(4 duplexes in my name) have me at about 35%DTI, I am about to add another multi-fam property and it would bump my DTI to 46% even though it cash flows $2000...Do people simply start buying in LLCs(DSCR) at this point for this reason?

Any advice appreciated.

[Tyler Warrick]

Quote from @Anthony Rondinelli:

Quote from @Tyler Warrick:

Quote from @Greg Scott:

You are talking to the wrong mortgage people.  It is very common for the typical bank mortgage person to make this mistake.  I've heard it first-hand.

A mortgage person that understands income producing properties applies 75% of the rent towards your income. If you are buying cashflowing properties, your DTI should improve with every property.

Greg brings up a good point, but keep in mind you can only offset the subject property income by using 75% of the rent UNTIL you file it on your tax returns. Only at that point can an underwriter recognize it as an income producing property.

Again, this is understood. What I am getting at, is if it is worrisome, or avoidable, as even a good deal(see scenario above) will raise DTI

In that case, yes DSCR loans closed in an LLC will not report to personal credit and won't affect your DTI.

Just make sure you do your due diligence as not every lender who closes a DSCR (individual or LLC) loan will avoid reporting to personal credit. A ton of brokers on here will take a DSCR loan to UWM and UWM will 100% report that on personal credit these days.