Portfolio expansion financial options

[Devin Clark]

I have two rental properties (SFH/Duplex) with a fairly hight debt to income ratio as result (~40%), but have a solid government job and plenty of investments in financial markets to be considered financially healthy. How do I continue to obtain loans for personal properties or within a LLC structure with a higher D to I? I want to expand my portfolio every year or two like others on the podcast, but don't know how they do it financially! I prefer long-term turn key rentals but open to BRRRR as well. Thanks all!

[Jay Hurst]

Quote from @Devin Clark:

I have two rental properties (SFH/Duplex) with a fairly hight debt to income ratio as result (~40%), but have a solid government job and plenty of investments in financial markets to be considered financially healthy. How do I continue to obtain loans for personal properties or within a LLC structure with a higher D to I? I want to expand my portfolio every year or two like others on the podcast, but don't know how they do it financially! I prefer long-term turn key rentals but open to BRRRR as well. Thanks all!

 @Devin Clark The first thing to understand is that you CAN use rental income on the properties you are looking to purchase. Within the appraisal the loan officer should order what is a called a 1007 market rent schedule. You can use 75% of that 1007 number to cover the mortgage on the property you are purchasing. If the appraiser says the market rent is 2000 a month you can use 1500 to cover the new mortgage. So, if your payment/taxes/insurance payment on the new house is say 1600 then you are only having to carry that 100 dollar difference on your debt to income. So, the point being in this case your 40% DTI might go to 41% which would still be fine.

IF the above does not work for you then the next step is debt service coverage ratio (DSCR) which ONLY looks at the rent of the subject property and nothing else. You debt to income does not matter. You will pay a higher rate, usually higher costs and often have a pre-payment penalty for these loans.

A LOT of investors assume they cannot qualify for the first approach, and or coached towards the DSCR. It is a great product for those who need it but make sure your LO actually takes the time to investigate the first option first.