Financing First Deal in Baltimore

[Mark McGarry]

I tried this post in the Baltimore specific forum but did not receive much traffic so I'm trying it here as well.

I'm having trouble deciding how to try and approach financing a first deal, bear with me while I lay out the situation. I currently own a row home in a nice neighborhood in Baltimore for about 3 years, the first 2 years of which I did a slow and steady "live in reno". I converted the house from a 2/2 to a 3/3 by having the basement dug (common in Baltimore city to make an old basement  deeper to capture more living space, I went from a 6' ceiling to an 8' ceiling) and then finishing it out myself from there. I have been renting the basement now for 1 year and have the income on my tax return, although for just the basement it is not that much.

I'd like to look into purchasing another home that offers a similar opportunity for me to do a slow and steady live in renovation while converting my first home to a rental. I like this idea because I can do a lot of work myself and really save on costs but I am a little obsessive and the result of that is that I work very slow (so not ideal if it would mean vacancy or slow get-ready to rent). Running the numbers on my current home, including all expenses (maintenance, vacancy, capex) and using a conservative rent figure (determined from similar rental listings), my house should cash flow as it is.

We have some cash saved and want to start looking for the next deal, but I'm concerned that we won't be able to qualify for another mortgage from a DTI perspective without being able to offset the current mortgage payment more than the 1 year of 1 bedroom rental income can do. Does anyone know of a a bank we can talk to who might consider the "potential income" of a lease? I'm relatively certain the big banks would be a no go in this department but I'm not sure where to start after that.  I think even if we could have 50% of the potential income from a lease considered we would be in good shape to qualify for another loan.  

Alternatively, if I'm being crazy and there's a better idea out there, I'd love to hear it. Look forward to hearing from some of you.