Real Estate Home Mortgages/Real Estate counsel


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: Thanks for your question - The lenders will look at your tax returns to determine what your "qualifying" income is - They will look specifically at your Schedule "E", rents/and royalties and then average the previous two years - If the properties are free and clear and rented the whole year, you are likely showing a net income from them - You can add back in any depreciation - They will also take your, employment base pay, and average in any overtime over the last 2 years (if it is likely to continue)

Most lenders are requiring a minimum of 20% down on investment property and want a debt to income ratio of less than 38%.

Forming a LLC or corporation is expensive and time consuming - You would need to form it, deed the properties out of your name, open bank accounts for each property and then you'd be "out of the market" until the LLC/Corp shows income in two years...

Try finding a local bank rather than a broker -

I hope this is helpful, thanks for using!

---------- FOLLOW-UP ----------

QUESTION: Thanks for your help I appreciate it. I have 20 percent to put down and I will try with a local bank. Also Since I have three houses and a condo, one of those houses I live in is their a way I can best protect and limit the amount of taxes I pay to maximize my profits, that is why I was considering forming a Series LLC to protect my assets and maybe benefit from some tax exemptions.

I need to preface my answer by stating that I am NOT a CPA, and suggest that you find a qualified tax expert in your area.

You're going to spend a lot of money forming the LLC, transfering the deeds to the LLC etc., The LLC would be required to file annually, and since your properties are free and clear they are likely generating income that would be taxable - Factor the "start up costs" for your LLC and you're going to have a HIGHER expense than you do now, plus a lot of paperwork and time expense.

You are in a good situation now with your income generating properties paying your primary home get the benefit of the mortgage interest deduction on your primary residence.  Depending on when you plan on retiring, you may want to look at accelerating your payments on your primary home mortgage to try and eliminate it by the time you decide to retire.  YES, you would reduce your interest expense and possibly pay more taxes for the time being, but the ultimate goal would be to have your primary paid off, other properties generating income to pay the tax expense AND put money in your pocket.

Make sense?  I know it sounds confusing...
About Real Estate Home Mortgages
This topic answers questions related to purchasing a home, owning a home, home ownership, mortgage education, mortgage applications, and mortgage needs whether buying a first home or refinancing a current loan. Issues related to home ownership, home equity, mortgage education, refinacing options, home improvment finacing, first time home loans, home equity loans, vactation home loans, and mortgages for investment homes are dealt with here also. Though not the primary focus of this topic, Home Equity Lines of Credits (HELOCS), reverse mortgages, and calculating home equity may also be asked. If you do not see your home mortgae, home finacing, or home equity question answered in this area then please ask a question here

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Brian Beardsley


Most creative financing / conventional financing questions


Used to be on the All "list" Active in the business for 20 years, operating Mortgage brokerage for last 10

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