Factors impacting ability to take out more loans for investments

[John Y.]

I'm thinking of buying more rental properties and curious to factors that may limit ability to get more loans. I've been borrowing under my person and not my LLC .

-I have two loans ($500K total) on two properties, taken out as investment properties under my name (not LLC)

- Both properties more than cover loans and slight positive cash flow each month.

Q: Is there a debt to income or some ratio that lenders look at when determining whether if I hit some ratio that will cause them to stop lending to me? Or as long as I can show I have income to support service of those existing loans, then I should be able to get additional loans to buy more properties. 

Q: If I get a commercial loan, they are usually 5 year ARMs and I don't want to want to deal with refinancing. Does it make sense to do commercial loan or just to personal investment property loan? What are pluses and minuses to each?

I apologize in advance if its not phrased clearly and I hope you understand the jest of the question.

Thanks in advance.

John

[Account Closed]

You are correct it is usually debt to income that limits. The first issues usually is if there is not enough cash flow to cover all expenses you add to debt. The other challenge would be proving the cash flow vs expenses any new purchase is factored at 75% for market rent. If you have had the properties for two years you can use exactly what your taxes say there are some way to do things in between if you have only had it one year or less but questions will likely come up at underwriting. Also as you add property you will also need to show more reserve funds to float cost or vacancy.

There are portfolio lenders that will base the loan on rental income without out taxes which could be useful depending on how your taxes look.