How to keep investing in Buy & Hold after hitting debt ratio?

[Palmira Angelova]

Hey everyone!

Curious to see how people have overcome the debt ratio hurdle. I'm a relatively new investor focusing on buy & hold, and very passionate about real estate. I'm about to close on my 4th property and with that, will max out both the money my family (who live outside the US) and I have pooled together and my own debt ratio. 

I'm planning a couple of years ahead and wonder what options are out there in terms of getting my next mortgage, given that my debt ratio is maxed out. The most obvious is to increase my own salary (which is unlikely short term, since I'm already a high earner for my level of experience) or apply for a mortgage with a co-investor.

What else have people done? Are there any options with an LLC, or have others gotten around this by using a local bank?

Would love to hear your ideas, and thanks BP community!

[Chris Mason]

Hi @Palmira Angelova, 

Hitting you with property taxes and homeowner's insurance is required.

REI math is something most in my industry suck at. You can literally go an entire career only doing married couple nesting SFR scenarios. None of our licensing training, education, or testing, covers REI math. Knowing how to read Schedule E is not a requirement to be successful in my profession, so some huge chunk never bother.

Rental income from the property you are purchasing can also be counted, before you even own it. So normally after I'm done calculating someone's current DTI, I teach them how to use assumptions about rental income from the property and the impact it will have on their DTI. Basically, I qualify the investor, and teach the investor to mortgage-qualify the property (in addition to the other standard "is it a good deal or not?" criteria... just another tool in the tool box).

10 financed residential properties with 30 year fixed Fannie financing, cash out refinances too. A bunch of fourplexes theoretically makes 40 rental units possible without needing to go to commercial adjustable rate mortgages. Primary residence purchases aren't capped at 10, if you're feeling nomadic.