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Posted by Joe on July 12, 2001 at 12:27:32:


I am reviewing Carton Sheet's course and although anxious to get started, I am uncertain how i can continue to buy more property then my credit will allow. I must be missingh something simple. Doesn't my debt obligation go up each time I buy a new property? In other words, if I use a home equity line of credit to borrow $10,000 for property (A) then when I look at property (B) won't the bank consider the outstanding 10,000 loan against me? At some point the banks will stop lending me money because I don't have enough income to satisfy all debt. Is this correct?

I have pretty good credit along with salary from current job of approx. $150,000. It also seems that the salary level will negate any deprecitation I get from property I might buy. Is this correct?

Thank you in advance for any advise.
Joe

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Posted by Sean on July 12, 2001 at 18:48:42:

Well, assuming that you are buying new properties and renting them for enough to cover the note then it won't be as bad as all that, will it?

Banks normally assume that you lose 25% of the rent to vacancy and maintenance. Accordingly if you have a place rented for $1,000 and your PITI is 800 the bank will assume that after vacancy and maintenance that you are really getting $750 for the place and paying $800 for PITI -- a net loss of $50 to their way of thinking.

On the other hand with $150k of income you can afford a lot of "-50" properties. And don't forget that every year you can raise rents.

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Posted by Joe on July 13, 2001 at 09:48:12:

good points.

thanks