We apologize, but the forums are closed for new posts. Click Here To Join The Unemployables Facebook Group

Welcome, Guest. Please login or register.
May 10, 2021, 03:51:57 am
Home Help Search Calendar Login Register

Welcome, Guest. Please login or register.
May 10, 2021, 03:51:57 am
Home Help Search Calendar Login Register

Author Topic: Do lenders impose a max on # of rental properties?  (Read 19064 times)

Offline christopher w

  • Member
  • *****
  • Posts: 2237
Re: Do lenders impose a max on # of rental properties?
« Reply #30 on: November 01, 2007, 02:40:15 pm »
Kief,

You might try contacting investmentloans who posts on this board. He will be able to help you find the products you need.
Christopher W
C-214.923.5781

Offline kkiefer216

  • Member
  • *
  • Posts: 49
Re: Do lenders impose a max on # of rental properties?
« Reply #31 on: November 01, 2007, 02:52:25 pm »
I will try contacting him.  Thanks for the info!

Offline Investment Loans

  • Member
  • *****
  • Posts: 1062
    • www.BenCarmona.com
Re: Do lenders impose a max on # of rental properties?
« Reply #32 on: November 01, 2007, 09:20:37 pm »
By the way, if you had rents of $2,275 and PITI of $1700, your DTI on that property would be 100%.  Therefore, given what your other income and expenses were, it would increase your DTI.  Lets say for example your income was $5,000 and expenses were $1,750.  My DTI is then 35%.  When you add in this property my DTI increases to ((1,750 + 1,700)/(2,275*75% + 5000)) = 51.45%. 

KKiefer,

Forgive the fact that I didnt read through the entire post, a little head spinning.  But I got as far as this quote from you and think I realize where you might be in error.  The dti factor would change very little for that example.  Your payment would be treated as a wash.

This is the way that a lender will calculate rental income.

Your Income = $5,000

Your expenses (without mortgages)= $1,750

subject properties:
Rental income x 75%
If this figure is a negative the defficiencey gets added into your expenses.  If it is positive it gets added into your income.

Other properties:
Rental income x 75%
Same thing as above.

In your example if this was the subject property with no other properties factored in your dti would actually go down a bit.  The difference of $6.25 would be added into your income.
$2275 (rent) x 75% = $1,706.25
Subtract out PITI of $1,700 leaves $6.25 of positive cash flow.

Your income is now $5006.25.   Expenses still $1,750 (for those with additional property- any negative cash flow after the 75% factor would be added in here).

Dti 34.96%

Adding on properties that cash flow like your example would be fine.  Where investors get caught up with dti issues is when properties are vacant, rates too high, or over leveraged.


To Our Success!
Ben Carmona * Consultant * ALL STATES * www.BenCarmona.com * 314-914-6052
1-4 Unit Investment Properties
Hard Money Rehab Loans * 24hr/1 day double close funds * Portfolio/Commercial/Business Options * No Seasoning Refis

Offline Investment Loans

  • Member
  • *****
  • Posts: 1062
    • www.BenCarmona.com
Re: Do lenders impose a max on # of rental properties?
« Reply #33 on: November 03, 2007, 03:13:51 am »
KKiefer,

Do you have any questions on the figures I used and how they differed from your calculations?
To Our Success!
Ben Carmona * Consultant * ALL STATES * www.BenCarmona.com * 314-914-6052
1-4 Unit Investment Properties
Hard Money Rehab Loans * 24hr/1 day double close funds * Portfolio/Commercial/Business Options * No Seasoning Refis

Offline LandmarxProps

  • Member
  • **
  • Posts: 68
Re: Do lenders impose a max on # of rental properties?
« Reply #34 on: November 03, 2007, 11:55:40 am »
InvestmentLoans, I agree with you but so many other brokers and loan officers are adding 75% of  the rent to income and the mortgage payment to debt. In almost all cases this raises the DTI significantly even on an income producing property.

I even called Countrywide today and the loan officer thought that is how they did it. After a lot of debate I will be talking to the branch manager on monday to try and confirm how they calculate their DTI with income producing properties.

On an income producing property it is either income OR debt only, right? Why do so many people factor it in like a NON-INCOME producing property??

How can something so important be so misunderstood by professionals?

Offline lassitermortgage

  • Member
  • ***
  • Posts: 129
    • Portfolio Loan Blueprint - No More Fannie and Freddie
Re: Do lenders impose a max on # of rental properties?
« Reply #35 on: November 05, 2007, 07:23:33 pm »
Don't forget reserves. I have a client that we are refinancing his #10 property but he needs to have 6 mos PITI per property. Luckily my guy has it but that's a lot of moolah.

Offline kkiefer216

  • Member
  • *
  • Posts: 49
Re: Do lenders impose a max on # of rental properties?
« Reply #36 on: December 05, 2007, 05:31:59 pm »
Investment Loans, I see how you calculated the DTI, although all the lenders I have spoken with calculate it differently.  They add the debt shown in your credit report (the mortgage on the subject property) to your total debt, then they take 75% of your rental income on that property (taken at 75% to compensate for operating expenses) and add this number to your income (or subtract it from your income if it comes out as a negative number).  The income therefore does not wash out your debt due to the fact that lenders require you to maintain a DTI ratio of, say 50% or less (usually must be lower than 50% give or take 10% depending on the lender).  The reason I have been told for this calculation is that since the properties are considered residential and not commercial in nature, they use it to calculate your DTI in the case that all your tenants decided to not pay rent/move out and you had to pay for all of the expenses out of your pocket.  That is why they are asking for the DTI to be under "50%" to factor in such rare occurences.  The problem I have with this is that I am a seasoned investor with five properties and have been fully occupied for the past two years.  The risk that the bank is factoring for would be understood if I just bought my first investment property and didn't have a track record of earning income on these properties.  In addition, I have economies of scale; whereas I have four other investment properties that supply me with positive cash flow on a monthly basis in addition to my full time job.  Let me know your thoughts.

Offline Investment Loans

  • Member
  • *****
  • Posts: 1062
    • www.BenCarmona.com
Re: Do lenders impose a max on # of rental properties?
« Reply #37 on: December 06, 2007, 02:51:43 am »
Whoever is giving you the information is incorrect.  Income from rental properties is not calculated like that.

For existing (non subject properties) 75% of the lease income is used. Or if going full doc, the schedule C income is used if the property was reported on the most recent filed return.

The total PITI is then subtracted from that.  If the result is positive then that would be added into your income. (at this point the mortgage payment is already accounted for and should show back up in liabilities)
If negative this figure gets added to your liabilities.  (at that point you would not any any type of income from rental back into the income side)

For the subject property a couple things need to be considered.  Many lenders have a 2 year landlord history.  If you dont have the 2 year landlord history then the income for the subject property has to be left off.  (not all programs are like this but most are).

If there is a 2 year history and income is used then use 75% of the rental income (or if full doc use tax return schedule C).  The same forumla as above applies...75% of rent against full piti...positive added to income, negative added as liability.
To Our Success!
Ben Carmona * Consultant * ALL STATES * www.BenCarmona.com * 314-914-6052
1-4 Unit Investment Properties
Hard Money Rehab Loans * 24hr/1 day double close funds * Portfolio/Commercial/Business Options * No Seasoning Refis

Offline kkiefer216

  • Member
  • *
  • Posts: 49
Re: Do lenders impose a max on # of rental properties?
« Reply #38 on: December 06, 2007, 03:36:30 pm »
the information is what I've been receiving from the lenders I've been dealing with.  Please let me know of several lenders that calculate DTI your way, so I can contact them for my future financing needs!

Offline Investment Loans

  • Member
  • *****
  • Posts: 1062
    • www.BenCarmona.com
Re: Do lenders impose a max on # of rental properties?
« Reply #39 on: December 06, 2007, 11:02:10 pm »
Are you a broker?  The lenders that I work with are all wholesale and do not work with borrowers directly.
To Our Success!
Ben Carmona * Consultant * ALL STATES * www.BenCarmona.com * 314-914-6052
1-4 Unit Investment Properties
Hard Money Rehab Loans * 24hr/1 day double close funds * Portfolio/Commercial/Business Options * No Seasoning Refis

Offline kkiefer216

  • Member
  • *
  • Posts: 49
Re: Do lenders impose a max on # of rental properties?
« Reply #40 on: December 07, 2007, 11:20:13 am »
no, I am just an investor.  Maybe you could refer me to some brokers that do work in Ohio.

Offline Investment Loans

  • Member
  • *****
  • Posts: 1062
    • www.BenCarmona.com
Re: Do lenders impose a max on # of rental properties?
« Reply #41 on: December 07, 2007, 07:19:56 pm »
You definitely need a good mortgage broker if you're in OH.

With only a few lenders doing stated loans in OH determining that you can go full doc is imperative.

There's forum rules about what I can advise on who to use.  Modestly I can say I know of someone though. ;-)
To Our Success!
Ben Carmona * Consultant * ALL STATES * www.BenCarmona.com * 314-914-6052
1-4 Unit Investment Properties
Hard Money Rehab Loans * 24hr/1 day double close funds * Portfolio/Commercial/Business Options * No Seasoning Refis

Offline cornerstonesvs

  • Member
  • **
  • Posts: 56
    • Cornerstone Funding Services
Re: Do lenders impose a max on # of rental properties?
« Reply #42 on: December 09, 2007, 03:23:58 pm »
We have clients who hold over $100 million dollars in real estate, residential and commercial, with loans from the same bank.  if the numbers support the deal, the right bank will finance it.  Especially in the commercial world.

if you are dealing with a bank who is capping your lending to only 10 properties then you are dealing with the wrong bank.  It's time to move on.  Period.

They're not hard to find, banks like BofA, citibank, wells, etc.  They all have departments that deal with investors.
Craig Grella
Cornerstone Funding Services, Inc.
Specializing in obtaining financing for commercial real estate, including acquisition, refinance, development and construction of all property types.
http://www.cornerstonesvs.com

Offline kkiefer216

  • Member
  • *
  • Posts: 49
Re: Do lenders impose a max on # of rental properties?
« Reply #43 on: December 10, 2007, 08:30:09 am »
Because I am purchasing three family dwellings (1-4 family = residential), I am limited to the lenders guidelines for residential properties.  I need to talk to lenders who are not planning on packaging my loan with others, therefore subjecting them to guidelines typically placed on owner occupied single family dwellings.

Offline REICLUB007

  • Member
  • *
  • Posts: 4
Re: Do lenders impose a max on # of rental properties?
« Reply #44 on: December 10, 2007, 06:37:16 pm »
Does anyone know any good lenders that does Blanket loans?

 




SMF 2.0.15 | SMF © 2017, Simple Machines