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Updated over 5 years ago on . Most recent reply
10 in my name, 10 in spouse's
Buying my first rental property in the next month or two. Planning on putting the mortgage in my name. If all goes well, we'll purchase another in my name in another 8-12 months and be on our way. After 5-10, we'll start putting them in her name. We do plan on doing LLCs. Anyone see My issues with this?
Definitely planning on 4 properties. We'll see about more, but want to leave the door open on the finance side. Have a good plan in place, I think.
Most Popular Reply
We are on this track too. My wife has 7 and I have 6 Conventional mortgages. Doing two more BRRR's as we speak. As far as Fannie rules go (with no lender overlays) It is 10 loans per person. They will use 75% of your rental amount as income. The real reason I'm posting this reply is to highlight this... 75% of your rental amount should AT LEAST wipe out the PITI on that property on a good rental and Improve your DTI with each rental. Not add little bits of debt with every property. If not then you'll never cover maintenance, CAPEX, and management. BTW... Fannie will also let you use an appraisers estimated rental value as income on your application when financing a new purchase! Some lenders don't like to, or require sufficient experience, but Fannie is OK with it. So think... appraiser estimates $1500 per month rental rate, PITI is $1000, your DTI is actually improved because of your application, not weighed down! Can't beat it!
Why not do one in your name, one is her name?
I don't understand. I assume you are married or living with a partner and keeping assets separate? I like to hear more about your plan.
@Martin Silverstrim I did this. By the time I got to 10 I started buying for cash and doing delayed financing. By the time I got to 15, I just bought cash and didn’t bother with placing debt. (This has more to do with deals drying up. If the deals were still plentiful and my cash couldn’t keep up, I’d have continued to get the conventional loans. )
@Lynnette E. We may do that as well. She's not as interested in REI as me, but is ok with me starting with a few properties. I'm hoping things go well and she hope on board full steam ahead.
@Josue Vargas I've heard that as far as conventional financing goes 10 is about as high as you can go, but with each spouse doing 10 mortgages we could possibly get to 20 properties that way. I've also gotten the idea more recently that it might be more like 5 or 6 that each of us could do.
Either way, the grand plan is to simply get my first property done through a turnkey...get my feet wet and learn a little more about how things work. Then purchase
another within the next 12-18 months. Then another in another 12-18 months. At that point, my current reserves/savings for down payments, closing costs, and about 3k for a reserve fund for each property will be gone minus any cash flow from the properties.
Somewhere after 5-7 properties I should be able to have enough cashflow to buy another property (with financing) each year.
@Ryan B. Thanks. Good to hear it can be done. My current plan is basically worst case scenario: using current liquid assets to fund first three deals w financing, setting aside 3k for vacancies/maint/capex from the start, and continue saving up for future purchases w my W-2 job and cashflow from properties. I have 2-5 years left before leaving my Guard service and DoD civilian job (both with pensions down the road, but secured as of end of 2021), so looking to keep financing risk as low as possible. My 'why' for REI is really to get more time with my family by obtaining cashflow producing assets where possible and work part time as my kids enter middle and high school. We're pretty secure for actual retirement down the road, but could use more cash flow and time now:)
@Martin Silverstrim
If all goes well and you spool up your acquisition speed quickly enough, your credit will be affected by hard inquiries and increasing debt load. Alternating from the start is your best bet for maximizing your efficiency early (read returns).
Similar to what @Todd Rasmussen has said, as you add properties your debt to income ratio is affected. The debt to income ratio MAY cause an issue with putting 10 consecutive properties in your name.
It may just be the lender I was working with but they (lender) only considered 70% of the rent I received from a property towards my income in the first 2 years of owning the property.
@Todd Rasmussen thanks. Not opposed to alternating at all. Probably worth considering
@Marion Lee thanks. I hadn't considered that I can actually consider the actual rental income as income...I only thought of the rental income in terms of what my net ROI would be that could be put towards future down payments after I had set aside anything for vacancies, maint, and capex. Seems like alternating is the best decision.
@Martin Silverstrim
Sounds like a lot of good input has already been giving but I’d highLu recommend talking to a lender in your state and get details that are actual and not hear say.
I’d also say, (depending on your state) if your married, their debt goes against you weather they’re on the loan or not. The 10 rule is a Fannie/Freddie rule. Not a lender rule. But again, seek advice from a loan officer and not investor outside of your area. Just my 2 cents.
Cheers and good luck, man!
@Martin Silverstrim
This will work. Im doing/ did the same thing. We are not quite at 10 each yet but are approaching. One peice of advice. Depending on your undividual income situation, one of you may more easily qualify for mortgage. For example since my income is much higher and thus debt to income ratio is much better than my wife i can get approved for larger purchases. I am more concious of her DTI ratio so it takes a little bit of strategy so that she has the financial flexibility to purchase in her own name but we make it work.
@Martin Silverstrim
Your plan seems reasonable, that mainly because I plan to do the same :). It sounds like you're veteran, if so have you considered VA loans too?
We are on this track too. My wife has 7 and I have 6 Conventional mortgages. Doing two more BRRR's as we speak. As far as Fannie rules go (with no lender overlays) It is 10 loans per person. They will use 75% of your rental amount as income. The real reason I'm posting this reply is to highlight this... 75% of your rental amount should AT LEAST wipe out the PITI on that property on a good rental and Improve your DTI with each rental. Not add little bits of debt with every property. If not then you'll never cover maintenance, CAPEX, and management. BTW... Fannie will also let you use an appraisers estimated rental value as income on your application when financing a new purchase! Some lenders don't like to, or require sufficient experience, but Fannie is OK with it. So think... appraiser estimates $1500 per month rental rate, PITI is $1000, your DTI is actually improved because of your application, not weighed down! Can't beat it!
One last thought. Qualifying for Fannie loans gets a little tighter in your later loans. loans 4-6 are tougher and loans 7-10 are tougher still. But don't even worry about that right now, just know that it's out there. Still great loans!
@James Phan I would consider VA, but I don't plan on moving. My primary residence has a VA loan. I do encourage any younger vet I meet to go VA route, but do it as a house hack. Wish I had known about that 10-15 yrs ago!
@Hart Pearson thanks. Food for thought. do you do LLCs? I'm still on the fence about umbrella vs LLC. I'm leaning towards no LLC to start and just increase my insurance.
Ours are titled personally right now. Fannie used to be less cooperative about LLCs. So you would have to finance the property in your personal name and deed it over to an LLC afterwards. We just kept running and haven't taken the time to set up yet another LLC. Attorney prefers it though. He says do LLC and umbrella. He says one is a belt and one is suspenders. Together they'll hopefully keep your pants on 😂😉.
I do BELIEVE Fannie will finance a property titled in an LLC now though. My understanding is that it's a new thing they'll allow.
@Hart Pearson
You are correct. I believe Scott Smith wrote an article in August describing Fannie Mae allowing properties owners to change their titles to LLC's.
I would say - dont worry too much about "who buys how many and when", and LLC's. Those things you can focus on when you buy the next, i would recommend on working on getting that first one first - whats the most important next step that gets you closer to this? Good luck!
Originally posted by @Martin Silverstrim:
Martin, Good though about your future investing strategy. I own four, and while I thought about what the lender may say of how much I own or how much the banks owns, I have never been to that point yet. I'm not sure why my lender will deny a loan if he knows I can keep with all debts. I show my assets when it comes the time. That said, I mostly work with one lender. He knows me and I already have several conversations of what I want to do in my future, and he wants my business as I want his business.
Good luck.
@Hart Pearson Thanks for your great advice! Would this strategy work even if your wife doesn’t have a full-time job? Does a lender use 75% of the rental income as income to qualify for the loan? My wife has an awesome credit score but only works part time as a substitute teacher.
https://www.biggerpockets.com/...Hi Matt! To keep you off of the mortgage application and do 10 and 10 she would need to be a stand alone applicant. If they can't document enough income for her then they'll need you to sign with her. But then it will count as a loan for each of you. (like one house is using 2 of your combined 20 slots). Does her income show on your tax returns? if she's been subbing for a couple of years then they may work with that number. And yes, Fannie allows them to use 75% of the estimated rental income that the appraiser gives them to qualify you for that loan. Just be sure that the lender is on board with it (some lenders have their own rules called overlays, find one that doesn't) and I generally discuss this with the appraiser as well so they know that the estimated rental value number is important to me and my approval.
To sum it up... IF your wife has no debt AND they give her credit for the estimated rental income, then it's possible she could be approved with no working income!