Hi, I wanted to know how can I accumulate properties without taking a large hit on my personal debt-to-income ratio?
I want to purchase 10 properties this year and 20 more the next year, and I am trying not to hit that wall.
Thanks
PR
PR,
If you place your property in a land trust and triple net lease it to your tenant, you have no responsibility for maintenance and repairs and virtually no exposure to vacancy. Your trustee sends a letter to your lender and they credit you 100% with no ding to your debt-to-income ratio. I do this regularly. Good luck.
Da Wiz
If you are only looking at DTI, it is not really the amount of debt you are concerned with here. DTI is really the “debt service” to income ratio. In other words, the mortgage payment not the amount of the loan is the key factor.
As long as 75% of your rental income covers 100% of your mortgage payments the property will not adversely impact your DTI.
Great! I was concerned that I will hit a brick wall eventually if I keep buying investment properties and it is added to my personal credit report. All of my properties are rented, paying 100% of my mortgage and giving me cashflow. Thanks for the info.
The challenge is make sure the way its structured is so that you dont remain on as co signer for the land trust because then the properties will still report on your credit.
I agree with what everyone else is saying and will also add
that your goal is to have these mortgages removed off your credit report as soon as you transfer ownership into your landtrust/LLC/Living trust so that the debt to income ratio stays lower for your future purchases.
Who can help me structure this type of strategy? My properties are in Tennessee. Do you have any recommendations?
The Bank I work for is not registered in TN .
Im sure some of the Moderators of this site can be more resourceful to you regarding a TN lender.
Otherwise you can search through : http://tennessee.gov/tdfi/compliance/Lic_Mortgage.html
And browse companies registerd with the TN banking dept.
irogers,
Your state is one of only two states that does not subscribe to the “Doctrine of Equitable Conversion”, which is the method we use to convert real property to personal property. You can still use a land trust, but it will remain real property.
Greenbanker’s comment re structuring the land trust so you don’t remain as a co-signer is incorrect. You can be the only signer on the loan and, yes, it will be reported on your credit, but ,no, because you have your tenant in a triple net lease, the Trustee’s letter will be sufficient to have that note not ding your debt-to-income ratio at all. We use the Trustee letter for this purpose all the time with the desired effect.
Da Wiz
is it still true if I am residing in California, but buying properties in TN.?