How much credit can you have?

Question

My wife and I own a house and we just bought a beach property. We did the beach condo as a 2nd home (I did it truthfully with the bank, and they know i am doing it as a STR...incidentally,  they required I self manage if I wanted to call it a 2nd home).  I am still very interested in the Smokies (working with Avery's team/Gennifer), but I would also need to do this as a 2nd home.  I am not sure I can even call this a 2nd home when it is actually my third "home."  Can I even have 2 vacation homes in addition to my primary residence?

But, to my original question, at what point do banks stop allowing me to borrow money, because I have borrowed too much? When I google search this, it just talks about credit cards.  I know if I had a STR "business," they would let me use that income to borrow further properties.  I do not, though. But since I am going for another vacation home, at some point, will they not pull the plug and say "nope. too much." My wife and I both work and have good income. I am sure that matters in whatever mathematical formula I am trying to find.

So finally, what is the formula to see how much money I am allowed to borrow?  I do not want to go through the whole process and then realize I am not a candidate for borrowing more.

Luke Carl · Answer

@Andre M.

You can have as many second homes as you want assuming the following:

A. They must be in different markets (actual regulation is more than 65 miles from your primary home and more than 65 miles from each other)

B. You have enough DTI to cover said properties. In other words “can you afford to pay all of these mortgages.”

Just Google “DTI Conventional second home” Or even just ask whatever lenders you’re working with or have worked with :)

Luke Carl · Answer

@Nancy Bender I think he’s kind of asking two questions in one so it’s a bit confusing but generally speaking it’s as simple as this.... you can borrow as much money as you can afford to pay back with interest!

Of course once the properties so income in a tax return you’ve got wiggle room to buy more!

Mathias Simmons · Answer

If you're doing STRs at a distance, definitely read David Greene's book on Long Distance Investing. It has lots of good information that will help. It also has a chapter on lending that has a lot of information on what lenders are looking for and how to stay bankable.

Nancy Bender · Answer

Good question. I haven’t figured that out yet either. You hear of people that scale up to five or six properties in a year, but I am very unclear how that happens. You can just borrow so much I would think!

Andre M. · Answer

Thank you! That’s the term I needed.

How much credit can you have?

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