Developer · Austin, TX · Member since 2020 · 82 posts · 61 votes
Question for you smart bears out there --
How do folks
a) reduce their tax exposure
while simultaneously
b) continue to qualify for financing for bigger and better deals (as they continue to do deals)?
For example, my day job is in tech and I pay myself a modest salary and my company (I own it) pays for things like my cars etc etc
I get the basic precepts of a) (expense & depreciate everything allowed etc etc) -- but if you are too successful in that, when it comes time to finance your next deal, doesn't the lender beat you up about not having enough income and subsequently make it harder to qualify for debt for larger deals?
Would love foranyone who has conquered what seems to be a fundamental paradox to provide their thoughts.
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
6y
Folks who can't meet DTI, debt to income, requirements of FANNIE/bank borrowing have a whole world of portfolio (now being called DSCR lenders) at their disposal. No DTI/W2 underwriting. Only DSCR, debt service coverage ratio, in other words the deal is underwritten based on how much it could rent for or IS being rented for. The borrower just needs a modest FICO, >650 ish, down payment etc. Higher LTV, some as high as 80% but higher interst/pts, at 75% LTV pts might be 1%, interest 6% to 6.5% which given no DTI needs these are great terms, all 30yr.
one org is: financeofamerica they also do DTI/Fannie but also DSCR. I have no connection, only used them. Maybe google for DSCR lenders?? Looks like a google search could be: asset based rental loans..
Down side is they don't offer rehab funding built into the 30 yr purchase loan like FANNIE/FREDY's HomeStyle rehab loan (like 203k but for rentals) or the new $10k repair escrow for very light fixing at purchase. To buy a fixer you need to use hard money to buy and fix then immediately REFI into 30yr. Yes more fees, done this,,, but it works. And the only game in town with you don't have enough DTI.
1) Try to qualify for loan with standard DTI/W2 underwriting. 2) See how much they will qualify you for and at what interest/points. 3) Get a competing quote from a DSCR lender. 4) Compare subsequent deal cashflows, and choose better option.