Another thing you can do is purchase cheaper properties that provide a higher cashflow (because they're less expensive). Lower value can mean lower insurance and lower taxes. At least consider this for the first few properties. Even though you can charge higher rent with higher valued properties, the higher carrying costs will eat that up until you can pay it off (which is where the higher value benefit finally kicks in). And it seems that at the beginning, quantity might need to be your focus until you can earn enough cash flow on the minimum debt in order to qualify for mortgages on higher quality homes without exceeding the ideal DTI.
Also, you don't just want to qualify....you want to qualify for premium rates. For that many properties, you could pay extra in the thousands (per year) for even 0.5% below premium....and higher rates also raise your monthly payments, raising your DTI.
I'm struggling with the same thing now. Even though the mortgage on my current property is tiny, I earn so little that I could only realistically purchase 2 more properties no more than totaling maybe $160k. I'm going to make my next purchase a student condo between $50-65k...which is not the SFR I originally wanted at up to $100k. But it's what is necessary to allow me to move forward with my next purchase after that.
Think of it this way...you could have a $45k condo cash flowing $250, and a $90k SFR cash flowing $350:
- The $90k SFR doesn't allow you to buy another property due to DTI, but it still looks like a better deal than the cheaper property, right?
- Until you realize that you have room in your DTI to purchase a second $45k condo, also cash flowing $250. Now you're looking at $500 vs $350.
Just something to think about (and something I've been thinking about as well). Or go for a du/triplex, multi-unit thingy that will instantly cash flow for higher than multiple SFR's, with less impact on your DTI as well.