All Forum Posts by: Account Closed

I'm curious about how debt to income ratios are calculated- in particular, income from other investment properties. In chess, if you are up a piece, you want to do even trades to water down his men and have a higher percentage difference even though you always have the same absolute difference. 

In RE, the more properties I get, with notes attached, even if they all cash flow, the more my DTI approaches 50% or whatever.

Say I make 100k from my job and only have my home mortgage of 1500/mo and nothing else. That's a good DTI. Say then I buy 5 investment properties with massive amount of debt but each cash flow by 300. Given their formula for vacancies, I can see how they justify modifying these numbers, but given that, do they treat these properties as black boxes and only contribute net income to the equation or do they add both the income and debt sides and penalize the successful investor? 

If they gross both sides up, is there a way to avoid this penalty or bypass this so your DTI doesn't go stale and plateau (because each property is a producer)? 

I'm only starting my research in this but feel free to share your wisdom. 

I got denied credit for the first time, applying for a heloc and then a car loan. Now before you go off- I'm probably not going to get a car and make payments. It's not financially wise. I have never done so in the past, but a part of me wants to trade in my CR-V for a Wrangler. I don't know if I'll do it, certainly not before buying my next house but I wanted to at least "practice being successful". 

So my credit score is around 720 and my sole official debt payment is 1020 of home mortgage. Then I have 730ish to an income share agreement company for a few more years based on my earnings. Up to 17 percent of my monthly earnings up to 30k in total or 24 payments in total. That's a binding agreement but it's kinda off the debt books I think. Maybe the found it. Whatever. Still, that's it, so about 1700/mo and my income on the books is 4200 + 400 cash flow from 3 townhomes. I also have personal month to month rental income at my house I'm not counting. 

But I have a good credit score and decent income. This was first time I was denied. They only offered 40k of heloc though I have a few hundred thou in equity and even the car loan denied me. That was a shocker. I don't need the money. I have cash in the bank-- too much just sitting in cash probably. I's because I'm not needy and stable that I'm shocked. I will be totally fine but it's because I will be fine that I'm confused about their decision. 

Was it just straight debt to income? I guess if they divide 1750/4300 it's 41 percent. I didn't realize that was that high. In a few months I should get hired on and get a big pay bump from being a contractor. Let's hope. Then in year and a half when the ISA is paid off things will skyrocket up. 

But i was wondering if they gross out my investment properties, in which it will skew everything to 50:50. Let's say you have a million in RE debt payments and 1.1M in revenue. It will be close to 50:50 and water down your personal income and obligations. But if you net them you just add .1M to your personal payments. I chose big numbers to illustrate the point. I have about 4000 in expenses and 4400 in revenue from investments. 

This is stuff I have to learn. I won't get the car. that would kill me credit wise right now. I could even pay cash. But it was a shock to get denied that hahaha. 

I have a lender I work with and he says he can get me my money. The times I was denied I didn't put much effort into it, into establishing a relationship. It was just a boilerplate application. 

I'm finding with my lender that they don't want to lend me with less than 20% in the property, even if the numbers look good. Why is that? They say it's Fannie May rules. How do I skirt that? i asked them about PMI, they say for investment houses it's not done. I don't want to expend that much because then I won't be able to buy more properties. I like the idea of using a mainstream lender. 20% is a lot and means I can't keep buying properties.

I have an agent to use and lender. I want to expand myself and my abilities. I started reading books and I've always paid attention in business law and accounting. So the thing is I want to get smarter. Also the people I've been working with do everything traditional, and that's a slow process to gain real estate

I had an offer accepted via email for a 185k duplex that I told him subject to me being able to attain suitable financing. He wants a written purchase agreement. This is my first offer I've made on a house without an agent (my cousin). I'll use him through teh process but gosh darnit I want to be more independent. I'm studying BIll Vaughn's system in particular protective clauses in forms but you learn the most by taking steps. I used to be a public accountant so I can do the math if I have the discipline and I liked law and contracts but this is new so I want to be on safe ground. 

So I guess I can do the numbers and generate a purchase agreement subject to 

-1 attaining suitable financing

-2 subject to inspection at buyer's expense

-3 subject to current tenants being verified 

The numbers seem good- too good. But I want to get financing with lower money down so I have less skin in the game, maybe 5% so that would mean more PMI so I have to look into that. PMI seems pretty low per the calculator. It all seems really good. Man this seems too easy. What's the catch?

I feel like we're just in the casual stage but he wants a written PA so I have to have everything I'd need. I have to start thinking of the getting him to agree to closing costs or all that stuff, at least so we can begin process of negotiation. What's everyone's thoughts. 

I'm just looking over the Bill Vaughn form. It looks pretty good. I don't know how quick I can get financing in my employment situation. I have lots of equity and some rental income but no w-2 income rn. I can maybe get a guarantee from my dad so that's the best bet or get re-hired in my new career as coder finishing a bootcamp. It is crazy doing deals. This is being on the edge. Honestly the numers aren't so terrible. What's the worst thing that could happen? Why do I overworry? Why am I so over deliberative on everything?

Thanks yeah I planned to use an agent to complete the transaction but love to be as independent as possible in the process- for convenience, speed, self-awareness. I don't mind relying on good people but I hate depending on people.

So I looked at a property today. They'd take contract for deed or cash from a loan. Rates are a steal. I'd have to put down 25% (or what we negotiate) for CFD so that would be money at risk. I realized if one does a CFD and pays 95% and then misses the last few payments and loses all equity, one is still ahead financially if the property cash flowed the whole time significantly. but when they ask to put a lot down or if it needs massive repairs or whatever- that you choose to undertake (Because CFD you can always walk away, right?) then you have skin in the game.

This property looks really good. They're pro investors. The Two tenant families in the 1800s 2-story duplex seem 'seasoned' and I'd get them.  Combined it brings in about 2300/mo and asking price of property is only 185k. This seems too good- I could cash flow over 1k/mo when all is said and done? Why would I not? Tell me, why would I not, if I can get financing? I want to make them an offer but I want to do so intelligently. I believe in fairness and non deception but also intelligence and I'm learning this.  

So in making ht offer, which I want to do tonight-- offers do not usually involve a form right? That's more purchase agreement? for forms I was going to use Bill Vaughn's forms that I got, from hsi program. They include the clauses that protect me. I can make a purchase agreement with clauses like "subject to attaining suitable financing" and "subject to inspection" (roof, foundation and everything are solid). So of course I would want this property right? So do I use my agent (my seasoned investor cousin) to make the offer, or can I DIY? I want to DIY if I can here but for closing and all I could use him. He's against this property but that's not why I want to avoid him. I just want to man up and go for it and grow. 

Ok tons of questions. Also my financial situation- I have a 2.75% 15 year mortgage on my home property, PI is about 1200ish. I can refi at about the same rate (I'm told) for 30 years. That would lower my monthly pmt between $7-800 which is huge not just for freeing up cash but also lowering debt to income ratio. I can still pay down as fast as before if I choose to. Why wouldn't I? I got laid off though and am just finishing coding bootcamp about to start searching for work. At this second I don't have non rental income to qualify for anything. My dad is well off but doesn't want to lend and I don't want to be lent to so he can guarantee, get his name on property as owner non occupant and he won't even charge me the 100/mo I offered. He has nothing to lose. The lender is down for this and when I get a job they can take him off and quit claim him. This starts the ball rolling for this wave of investing. Of course I'd want to do something similar on separate properties if I could, if my dad and the lender are down but good to start with my home right now I guess. Things are quickening and I love it. I love action. All the stuff I mentioned literally manifest today. See I understand the bank's requirements and POV (I have been a CPA) but in my view I "should like" to be lent on every property, if I get 20% down from my equity or whatever, regardless of my income level because the property will cash flow, but banks and lenders don't think like that, even though it's logical. So if I can get my dad to guarantee or just wait till I get income, even relatively low, I think I'm good. Or maybe do mortgage insurance. Didn't ask him about that. But I want to keep getting lent to on quality properties that will cash flow as long as I have the down payment. If they don't do this I can see about my dad guaranteeing. He might not on other properties but I can start with my home. That refi will help as UI peters out. 

So I want to make these guys I saw today an offer. I think the 185 price is fair and workable. I just want the right "subject-to" clauses. I think but don't know that on the offer, it is more informal until you get it in writing. Subject to me getting financing. I could do the contract for deed today on my own without any third party help (I have a 40k heloc and my equity has increased significantly) but that's putting major skin in the game. I like the investor teachers that say you can't lose anything if you don't write any checks. Aren't they smart? So subject-tos I want are subject to finding financing and the house not having serious structural needs, and title being clear. I'm just talking about the offer and the beginning of negotation, not the actual written purchase agreement which will be more detailed. I'm careful to protect myself. I usually succeed in things which means I'm too careful and not doing enough. "Deliberative" was one of my Clifton strengths. He has another offer they're in negotiation with. He's expecting word from me tonight- so healthy pressure. So any timely response here is appreciated! Why they are selling: "He's the adult son of a real estate investor- so second gen, and they want to free up money for other deals. They're not wholesalers. I don't know why they don't keep it. Maybe they have better deals. I'd take 1k+/mo, if I'm not missing anything, less even 200-300/mo reserve for repairs. It's also right by metropolitan university. Even at 45k down (25%) it's a great cash on cash return--- just kinda need that 45 to be more protected than would be in CFD, so maybe say subject to financing I'd give them 190.

Listening and learning from Bill Vaughn- the theory is great.. now the implementation is greater and more interesting

I want to ramp up my investing and I want to be as free of reliance on agents for finding properties and also for doing comps. What are the best resources for doing your own comps and for finding properties? I appreciate other's expertise but I really value independence and DIY. I value teams but I value being able to do as much on your own as possible, so that even if you delegate, it's because you're choosing to, not needing to. I own four properties but they were all traditionally financed. The three cash flow moderately and the fourth or I should say the first I house hack so it brings in cash. This I want to know

1. how to do comps and where's the best place to get the data as a non agent

2. Where's the best place to find listings as a non agent? Preforeclosures and non foreclosures. Is zillow or the mls any good? I don't have tons of time to market and don't feel like cold calling. I'm looking at my MNREIA assocation. Oh I should look at Craigslist! 

3. Also how would you evaluate counties? WOuld people invest in a property or not as a landlord based on the county? I was told to not invest in Hennepin (Minneapolis) or Ramsey (St Paul) because of regulation and oversight and fees (before all this covid and riot stuff) but Dakota county is good (Apple Valley area) but I see a house that looks interesting in Ramsey. I think I just gotta do it. At what point would it be worth getting your real estate license and how big of a time and money investment is that? 

Yeah the theme of this all is I just want to DIY as much as I can without waiting on others. Even if I use them I want to speak their language and have their understanding.

I read or skimmed most of the reviews now. I'm going to buy the guide!! Listen, good or bad it's $100. Like someone says, if that causes you problems, you have bigger problems. Besides, it's tax deductible. If you learn just a few key things or gain self-confidence I'm sure it pays for itself. If we were talking 1500 or 10k, that's another story. I haven't started his program so I can't give commentary, and I easily get distracted with many irons in the fire. I know that my strength is life curiosity but that is also my weakness. I know that will likely be my weakness going in, but good lord a hundred dollars or thereabouts. Shrug it off. Myself I have optimism going in, but if it doesn't live up to my hope and optimism, it's just the cost of one month's internet, but I am sure it will at least give enough value to cover the $100 if not much much more. I believe it will give me enough tools and info to succeed if I push myself and I believe the biggest hurdle will be my ability to push myself and stay focused, since I'm not desperate. Dan Pena, who I haven't paid a cent, says the two motivators are inspiration and desperation, and most who come to him are motivated by desperation. For me I want to succeed in real estate and learn how the game is played and it all works. I have a few properties actually- four to be precise, including the one I live in, but they are all traditionally financed by and hold, and acquiring them that way, unless you have an executive's salary, is a long slow process and that's what I want to find alternatives to. I have also been learning construction and engineering principles and ideas, because I am passionate about that, even though I didn't study it formally, as well as DIY projects which I tackle at my own house, so I think I might be suited to a rehab property, which is what I am kind of drawn to. I don't know if Bill specializes in or encourages that. Fine if so, fine if not, I just think it would be particularly fun and fun to have that life accomplishment and experience under my belt, where I do as much as I can myself and oversee others doing the rest. To me it's about money but it's also about growth. I grew with my first personal home, and hacking that, and I grew with my townhomes, and I want to keep growing in life and in business and career and in real estate as part of that so I'm about to RISK a whole $100 and however much time I care to spend, knowing I get out what I put in. I don't understand how people can be so bitter about this but that's just me. I would understand if it were 10-100x the cost but what do you expect. I know there is that seminar/guru circuit in this field as well as others but the cost is so low. I have no affiliation with Bill Vaughn or any other educator in the field, I'm just your average guy with his .02 opinion. 

I filed with HR block online. It went well. They allowed me to include all my properties (4) at no expense.

Both my returns were accepted quickly. I'm still waiting on the fed refund which is unusual but I got an email from HR Block.

Your Minnesota homestead credit was rejected

I don't see these pages. The only chat agent or phone agents are virtual agents no exception. I googled around and read the mn sites. I don't know why it was rejected. I have to mail it and I have a lot of time to do this so I'm not worried but hopefully it will be accepted. I have about 600 due back me. I rent out 50% of my home. I gave everyone CRPs. 

It seems that HR option at the IRS site allows Schedule E. I prepared most of my return, just giving myself time to think of what I'm forgetting. They have it all and it works- I'm just scared they're going to ask for $50 when I'm ready to file.