All Forum Posts by: George Despotopoulos

Hi Julie,

If the traditional mortgage route isn't working for you there are definitely companies out there who will qualify you based on the property's debt to income ratio instead of looking at your personal DTI. Without knowing all of your details, i think something in the 7% range sounds like the right ballpark for those types of lenders. Their rates are higher than traditional lenders but they are willing to be more flexible with their underwriting. Most will probably want to pull your credit at some point, but not necessarily before giving you a rate estimate.

To get a rate in the 4-6% range from a bank you would probably need to talk to a local bank or credit union who is comfortable holding your loan on their balance sheet.  If lenders are telling you you're over-leveraged, it probably means that you're too leveraged for them to be able to make the loan under the guidelines of Fannie or Freddie (or whomever else they plan on selling your loan to). 

I hope this helps and feel free to message me if you want to talk further or have any questions.

@Katherine Madison. We hear the same concern from a number of people. There is no reason why the income from your property is not used to qualify a borrower for an investment property loan. If you are unable to qualify for a conventional loan, you should explore potential rental investor loans with specialty lenders. 

There are lenders out there that will look at the actual income from the property to qualify you for a loan and not your personal income. Down payments on average are ~30% of the property value. Keep in mind the Debt Service Coverage Ratio for each of the properties will be 1.25x. 

Good Luck with your future endeavors. 

@Charles Oglesby. There are different ways to perform due diligence for your rental properties before purchasing. A few items to consider are: i) Understand market fundamentals for the particular city (new employers coming to town, creation of jobs by different industries) ii) Look at unemployment trends iii) single and multi-family permit applications iv) Supply coming to market over the next 12-24 mos v) Home Price appreciation over last year and expected in the near future.

As a real estate investor, you do not want to be in a position where a property is operating at negative cashflow but there are certainly items you need to consider before purchasing that particular property in the first place. There are markets that are considered better for rental investment than others. 

@Steve S. Good Luck with whatever you choose but the most important thing is that you have options. Whether you want to pay off the mortgage or keep additional debt is a personal preference. There is always the "right" amount of leverage and debt an individual feels comfortable with. 

@Justin Young. 

Couple of items to remember:

1) Specialty lenders usually go up to 70% LTV on Cash-out Refis. At least 6 months but it is encouraged 12 months of seasoning for properties before you cash out.

2) Minimum 1.25x for DSCR.

Good Luck with all your future endeavors. 

@Rich Hupper. Based on what i am reading you may be able to get a 12 month hard money loan in order for you to buy the property. Remember though: Fees for getting a HM loan rack up quickly so make sure you review the terms closely to ensure it makes economical sense for you. 

This approach will give you some more time until you are able to find some cash at the end of the term and refinance the loan or you will need to sell the property. 

@Joseph L.. Looks good! Good luck on the rest of the project. 

@Ivo Draginov. Market is getting more competitive. Continue renting it out, you are just collecting cash every month. If you are seeing a pick up on your fix/flips and want to use the cash to do more flips that may be a good idea but I dont think the additional $75k will really make the difference here. 

Congrats on a great deal and good luck.

@Satya Nagarajan. I don't think you should be thinking about getting sued and losing your wealth when you own a rental property. Each property will have different types of insurance to help with any obstacles that come up with respect to lawsuits. Depending on the index fund or bond you invest in, those can arguably be riskier than owning a property in a good location that has consistent cash flow. At the end of the day, it is prudent to diversify your portfolio and mitigate the risk of downside from one asset class. 

@Satya Nagarajan. Holding rental properties that are cash flowing during retirement is a common theme. Not sure why you will be risking a potential lawsuit down the road. Holding rental properties with no or little debt that are cash flowing is a great way to help you with retirement.