The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: wageslave23 on June 21, 2019, 02:11:41 PM
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I'm thinking about FIRE'ing in the next year or so. The only thing is that I would want the ability to still leverage new rental properties with a mortgage. Is there anyway to get around the income requirement in financing a new house? Anybody have any experience doing this? Could I just get a job for 6 mo and qualify?
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I'll kick in. How many rental properties do you have?
To get regular residential mortgages? Its probably not happening.
To get an in-house bank/commercial loan? Sure. Once you have four plus properties, it starts looking like a business. Lower LTVs, quicker repayments.
This is my experience, both as a FIREy person right now who just quit my job and explored a mortgage and as a former business lender for fifteen years
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So I am an expert at this because just spent amount a month fighting with the bank on it. The issue is going to be your Debt/Income ratio.
So as long as you have income from your rental properties you should generally be ok. Banks usually like to keep D/I around 40% anything higher they will deny financing.
The rules are as such.
1. Income properties need 2 years tax returns filed.
2. Net income plus deprecation is used in the D/I formula
3. Loans for rental properties are not counted in D/I after #1
4. Target house is allowed to use 70% of current rents.
Rent Mortgage Net Income Deprecation
Rental 1 1800 950 850 300
Rental 2 2500 1500 1000 400
Rental 3 (target) 1750 800 950
Primary Home 1500
Job 5000
Income(yr) Debt(yr)
Rental Net Income (add back dep) 30600 Primary Home 18000
Target Rental Revenue @70% 14700 Target Rental 9600
Job Income 60000
D/I Without Job Income 61%
D/I With Job Income 26%
No idea what kind of money you are making on your properties but in this example you would need the job for six months. All the care about is the fact you have income (and credit score but based on the website your on, you are fine) Getting a job for 6 months would be a good call. *This has been my experience and what I have been told by bankers and underwriters, ymmv.
Cheers