Using equity when you don't have 2 years landlord experience

[Keith A.]

I have a few properties that are leveraged and also some that are free and clear. I have been able to use my salary to control the DTI for the first few of them but now am reaching my limit without including income from the properties. I only have last year collecting rent to show on my tax returns.

I would like to continue purchasing using the equity in the free and clear. Any suggestions on doing this? Are there lenders that would accept one year experience? Any help is appreciated.

[Bill Gulley]

Basically, yes, a smaller bank can consider rents with a new landlord.
What keeps larger banks from doing so is really what falls under prudent lending practices and thier written loan policy, and underwriting requirements if you are getting secondary market financing. It's just easier with a small bank that can be more flexible. Credit unions might be an option too and then brokers with private funds may consider suc refi, probably short term with brokers.

There are compensating factors as well. Say you were a leasing manager at a new car dealership, you had other properties but no residential leasing experience. Your day job is closely related in that you deal with the public, you know the legal requirements to secure personal property, you run a collections function, in other words, you have a clue.

If your DTI ratios are good you may not need rents, if you need only 35% of rents to qualify, that's an underwriting call that can be done. But, larger banks or institutions usually have stricter written loan policies, so it's finding that flexible lender.

Another use for such properties is as cross collateral assignments for seller financed deals. Adding more collateral to such deals can get you a better deal. Get releases at stated amounts. After the property is encumbered and you allow the lien to season, a bank will be refinancing without cashing out, another issue with non-owner occupied properties. The refi amounts can payoff the seller financed obligations in whole or in part.

You might also use the other properties in a purcahse transaction with a bank as the skin in the game, again a flexible lender using a blanket mortgage. :)