Owner occupant without enough equity to secure financing to move.

[Account Closed]

Hi everyone,

I'm new here so forgive me if I am asking a question that I can find the answer to easily.

I am an owner occupant in a hot rental area of Philadelphia. I want to move on to another house and convert my current house to a college rental. Rent in Manayunk is pretty much guaranteed due to the number of college students, young families, young professionals, and an A+ grade school rating.

My issue is, I bought my house a year ago only putting 8% down. When looking for a loan I am told that I must have 30% equity in my current home in order to count rental income towards my debt to income ratio.

I am confident that my current house will rent for more than the mortgage so I am not afraid of moving out and buying another home. I just need the financing. My real debt to income if you count renting out my house would be awesome.

Am i being too ambitious?

Are there creative ways to get around this DTI issue?

Thanks for any reply or direction to another thread!

-Matt

[Bryan L.]

@Account Closed - You have some historical data from a pretty small sample size. I wish someone had told me years ago before I got into rental properties - the actual, real, long-term averages say that you will likely only put 50% of the rent into your pocket and then have to pay the mortgage on top of that.

Let me give you an example. I recently had tenants who had been in the house for several years. So, no vacancies for several years. And they never reported any repairs either. Low and behold, he lost his job and I eventually had to evict. Now I'm seeing the repair bills. Thousands of dollars worth, plus the cost of the eviction, plus the advertising, plus the time that it's sitting empty while we get it repaired, plus the utilities that I'm having to pay while we are getting it repaired.

If you are counting on your success being better than average, then good luck to you. I see from your profile that you are an engineer, so I know that you understand the math well enough to know that it's very possible to flip a coin on heads three or four times in a row (or more), but also, that's just luck.