Personal Investment & Financial Planning Q`s/Real Estate Investing

Advertisement


Question
Hello I'm a Real Estate investor. I have steady employment as a nurse and I have been working at my job for many many years. I'm currently 58 years old and I own a few houses. I own two houses that are paid out for and one condo that is paid out for. I have one house that I still owe a mortgage one. So a total of three houses and a condo. The mortgage payment monthly is about 3500. I rent out my two houses and condo and I use that to pay the mortgage. With the real estate marketing starting to pick up steam I wanted to buy some additional real estate and rent them out and wait for them to appreciate. The issue is when I go for a loan or try to seek financing they tell me I'm over extended. I have excellent credit above 720 and never defaulted, was late, or unable to make my payments. I never formed a corporation or LLC all is done in my name. I would like to buy one or two additional houses and rent them out before they become really expensive. The price ranges of the houses I'm looking at are 50,000 to 100,000. Sorry in advance if you don't answer these questions, everything I have done so far was based on self research and self planning. Is their a way I can find financing? Should I form a corporation or LLC and is their any tax benefits that I could benefit from or ways to pay less tax on my investments? Thank you for your time.

Answer
Hi. Without knowing all of the details it is heard to comment on why the bank will not give you the loan(s). One thing I can mention however is that when banks review your information for approval, they do not give 100% credit for the rents recieved. In order to account for vacancy risk, they will often times only give qualification credit for around 75% of the rents you are showing in signed leases. When qualifying you, they will take this adjusted rental income then subtract from this all the costs of operating the properties. Once they arrive at this net number, they will add to this your current monthly debt payments such as your home mortage, insurance, taxes, credit card balances, car pmts, etc. The net amount of all of this combined cannot be more than 30% or so of your salary. If you are not falling within these guidelines then the most likely way of getting around this is to find a way to charge more rent on your current investment properties or to decrease your current debt payments. While setting up things like LLCs or other business entities are often a recommended choice for asset protection reasons, this will not help in qualifying for a loan and they typically will not provide any additional tax benefits. I hope this helps.

Personal Investment & Financial Planning Q`s

All Answers


Answers by Expert:


Ask Experts

Volunteer


John D Smith, CFP

Expertise

I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related comprehensive wealth management and investment concerns.

Experience

I have been providing fee only investment management and comprehensive wealth management services for the past 19 years.

Education/Credentials
I have a degree in Financial Planning & Counseling and I am also a Certified Financial Planner practitioner.

©2016 About.com. All rights reserved.