All Forum Posts by: Jim Macedon

There's just no way it's constitutional for the federal government--not even the states, which government this sort of thing--to void terms of a contract between two private citizens and force someone to allow a person to live in their property for free.  Private property rights are the foundation of the concept of freedom this country was founded on.

This is the least constitutional thing I've ever seen enacted.  Someone needs to hurry up and file suit so we can get a national injunction against this lunacy.

The other thing that adds to the problem of the idiocy is the pride of idiots. I apparently upset her by providing evidence that she doesn't know how to calculate DTI, so she turned around and included depreciation in my cash flow and said I'm denied lol.

This is killing me right now. I'm trying to get a commercial construction loan. Numbers on the project itself are great. I have 18 months of interest payments in cash. But since I have to do a personal guarantee, they are saying my DTI doesn't qualify because of my rentals. They are subtracting my rental mortgages once to get my rental income, and then counting the same mortgages a second time as a personal debt.

This is really killing me man. This banker insists on subtracting my mortgages from my rentals and then counting the same mortgages again in the DTI ratio. This is holding up my commercial construction loan even though I have the cash to make interest payments for 18 months even if my cashflow was zero.

Thanks for taking the time to respond, but that doesn't really answer my question. My question is, what is the correct way to handle rental properties when calculating DTI?

I have a condo development project I'm trying to get financed in the Austin, TX area. I'm running into two problems. The first is that the two banks I've talked to so far are looking at my own personal finances for the construction loan instead of the project itself.

But that actually would still work except for the second problem, which is how they are calculating my DTI ratio. They are putting all my rental property mortgages on the debt side of the ledger instead of calculating the NOI of my rentals and adding that to my income.

My understanding from reading posts here is that rentals are supposed to be handled like the following when it comes to DTI ratio (all numbers made up to illustrate the point):

W2 income: +6,000

Primary residence PITI: -1,500

Rental 1 NOI: +500

Rental 2 NOI: +500

Rental 3 NOI: +500

But that's not how they're doing it. They're doing this:

W2 income: +6,000

Primary residence PITI: -1,500

Rentals gross income: +9,000

Rentals mortgages: -7,500

In the first example, my DTI would be great, and that more accurately reflects reality as my net income is increasing with each new rental. However, in example two my net income, per the bank, is decreasing with each rental even though they are making me more money.

Is my understanding of this correct?

I paid off my mortgage in 10 years.  Every time I made an extra principal only payment, I slapped myself in the face.  If only you would slap yourself in the face once a month, you too could pay off your mortgage early.

You're being too generous when you say it works.  The hammer "works" at its stated function, which is to drive a nail slowly and with great effort.  I know of no one that claims that a hammer is a magic trick that accomplishes driving a nail better than a nail gun.  By contrast, the velocity banking strategy claims to be some super secret sauce that pays off your mortgage faster than just paying off your mortgage.  So judging it by its stated function, it doesn't work at all.

To all you land developers out there, are you able to finance soft costs (civil engineering and architecture)?  I'm looking to meet my equity requirement with non-liquid assets.  Specifically, I own the land outright and I also own another property outright that I intend to put up as collateral.  

I will maintain a reserve for interest payments, but $100k in soft costs doesn't work for me out of pocket.  In a scenario like this, will the bank allow me to draw for soft costs?