Looking to buy Investment Property and House

[Bades]

Hi, I'm looking into purchasing a rental unit with a business partner of mine before end of the year and looking to get a house sometime around September 2013. My only other major purchase/loan I've had was an Auto loan that is now paid off. I use credit cards regularly and pay them off each month staying under a 25% credit/debt ratio.

I have very good credit and was wondering if the two purchases I'm considering above will affect each other in terms of favorable interest rates? Will the bank see that I had within the last year bought an investment property and deem me more of a risk because of the mortgage out on that? Could I get a better mortgage loan for my house if I didn't finance the Investment Property through a bank?

thanks

[amarowsky]

I would imagine having the investment property mortgage would offset your debt to income ratio. Unless you had a proven long term contract from a renter to up your income. So that may be a problem. Honestly if you can make it possible I would secure your own home for living before purchasing the investment property.it seems like it would be easier to establish a better rate and idea for what you can afford beyond your personal living expenses.

[siggy_freud]

I'm no expert, but I believe most lenders like to see two years of income generation on an income property before they allow it to offset your debt to income ratio.

[Bades]

Good to know. Thanks

the rental property would also be with a partner, so that would help lower the risk too.

[siggy_freud]

Good to know. Thanks

the rental property would also be with a partner, so that would help lower the risk too.

It may lower your risk but unless you're only legally responsible for half the debt should it go belly-up, the bank won't look at it as being less risky in terms of it counting as a debt. At least that's how I view it.

[Bades]

It may lower your risk but unless you're only legally responsible for half the debt should it go belly-up, the bank won't look at it as being less risky in terms of it counting as a debt. At least that's how I view it.

My partner and I will be 50/50 members of an LLC, so I assume I would then be responsible for half of what ever debt the LLC owns?

You're right, it wouldn't necessarily be seen as being less risky, but I would be owning half the debt.

[amarowsky]

I believe as an LLC it would relinquish your liability for the most part. So I don't know how the bank would grant you a personal loan if you are the owner of a LLC, that is a whole different ball game I would imagine.

[siggy_freud]

If you bought and owned the property under the LLC, I don't believe you'd be personally liable at all, as it would be a company asset. Your personal finance status may initially determine what the company can get in terms of credit, but I don't see how they could consider the company debt your debt, if it was the company alone that acquired it. But again, I'm no expert, so you may want to consult one about that.

[esb3357]

As someone who has done this within the last year here my opinion. If you buy your investment property first, you will not get any of the first time homebuyer perks. In our experience in the states of Virginia and South Carolina, investment income is not counted until you have a proven track record of doing investment homes for two years. Therefore the debt of your investment property is included as if you receive no income from it.

As for the LLC. My husband and I are equal partners in our LLC. Since our company is new and has no credit or background. We had to personally guarantee the loan. So the loan does go against your debt ratio.

[amarowsky]

As for the LLC. My husband and I are equal partners in our LLC. Since our company is new and has no credit or background. We had to personally guarantee the loan. So the loan does go against your debt ratio.

By personally guarantee the loan do you mean collateral? Like personal collateral to back up your 'llc's loan for the investment property? Or is this guarantee something totally different?