NEWBIE Needs help :)

[Beth Crosby]

Hi everyone. I've been interested in real estate for a very long time. I am 55-year-old woman getting a late start. So here is the scenario that I am currently in. Two years ago after my children went off to college. I sold my primary residence and put most of it in a retirement fund. The remaining I purchased a small one bedroom one bathroom house on the Jordan river in Mississippi. I used cash for that purchase. I also purchased the two lots next to that house. One of the lots I decided I wanted to build a larger house on. So I did a cash out refi on the small one bedroom and have begun the build on the lot next-door. I plan to use the one bedroom one bath on the river for short term rental, utilizing that income to pay the mortgage that I took out for the build next-door. So here is my question I would like to start a rental property portfolio, primarily long-term rentals. Once the new houses completed. Would it be wise to do another cash out refi of that new build to start purchasing rental properties? And also since I've never owned more than one house or carried more than one mortgage, how does that work exactly? When I got this first cash out, refi to build the new house, my debt to income ratio barely made it. In fact, I had to take some of the money to pay off one of my debts to be able to qualify. If there's anyone out there who could guide me, I would greatly appreciate it. Thank you so much in advance! I'm excited to be part of this new community of investors and real estate professionals!

[Brian Cauldwell]

Quote from @Beth Crosby:

Thank you Brian, so do the private lenders do 30 year mortgages? The house we are building I believe will appraise for about $450,000. Would you recommend a cash out refi of the full 80% that I think is allowable or do a home equity line of credit? 

And yes, I am looking to build a large portfolio over the next year or two. Just want to make sure I have the financing straight in my head :)

 Yes! Most loans that my clients ask me for are 30-year fixed loans. 

As far as what the leverage I would do, depends on the property. The house that you are currently building, is that going to be a rental as well? If the answer is yes, do you have an idea of what you could expect in rent? Interest rates are high right now, so you will want to make sure that each property is still performing. The money you can pull out from this property will definitely give you a runway, but it would be nice if each property was making you a profit. Then worry about maximizing leverage when interest rates eventually come back down. 

Some DSCR lenders will do a loan for a property that is losing cash, but they are going to hammer you on the already high-interest rates.