Financing Help for Low Income

[Makayla Mack]

Hi All!

My mom is interested in buying her first investment property and I've been doing my best to help her get started. Her big picture overview is that she has about $600k between Roth & Traditional IRA accounts and a 401k account, she also has an estimated $400k equity in her primary residence. It seems like between these assets she should be able to access some cash to help her get started in investing. The biggest issue we've run into so far is her income is very low, her primary home is her only debt but just with that her DTI is close to 80%.

My first thought was a cash out refinance or home equity loan or loc. With her high equity and a credit score of 820 we were hoping that would work, but it seems like her DTI is just too high for those options.

My question is: does anyone know of a way to access home equity in a way that does not rely on a <50% DTI? If home equity is not a feasible option right now, would anyone recommend taking a 401k loan or even a withdrawal from one of her IRA's? I've also thrown out the idea of a hard money loan just to get her started, once she is showing some income from her new property her DTI would be better and she could tap into her home equity to pay off her hard money loan.

If anyone is curious, the property type we are looking into purchasing is a ~$350k SFR in San Bernardino County that will be used for a STR. I currently own one STR property in the area so we are looking for something similar for my mom.

Thank you in advance!! 

[Taylor Dasch]

I am assuming she is older so would like to take less risk. If that is the case then she she would have to get a loan that takes into account the income the property would produce. My initial thought though (a little more risky) would be to use HML to purchase two flips, then use the profit from the flips to purchase a buy and hold property that would get her monthly income. Although it is not ideal to purchase properties in cash, that may be her best option and would lower her DTI so that she may be able to refinance for her next deal. I would speak to multiple lenders personally and see what they say.