Debt to Income Ratio while married

[ReLana Morales]

Hello! I'm new to real estate investing, but I already have one rental property (we're renting out our old house). I would like to purchase another property soon, but have a question about my debt to income ratio. Since I'm married, would I add my husbands income on the application even though he wouldn't be a co-borrower or, if not, would I half the total debt that we have? Any help on this would be great! Thanks!

[Leland Barrow]

Debt to income is your income that can be verified with tax returns, leases, or pay checks. Debt is any debt that has your name on it. If you have been in the habit of putting both your names on houses, credit cards, or anything else then stop. The spouse with the highest income should try to remain off of any debt including vehicles, so that you can have a good debt to income on your first 4-10 properties. You have to be a landlord for two years before you can claim rental income. You have to be in business for 2-3 years usually before you can claim business income.

Expect a debt to income problem while you are waiting for rental income to count. If your spouse has an income then you can switch after ten properties, transfer all of the non-real estate related debt and start over and purchase another 4-10 properties under their name. By this time you may be able to count all of your rental income for your spouses debt to income.

There comes a time where debt to income is no longer a factor because with each purchase you can pro forma income and it appears to increase income and not debt. You will also move towards portfolio or commercial lending and you do not get loans based on you, but instead primarily based on the deal.

Personally I think staying with buying SFR after 20 is a waste. Move to multi family and go after apartments with your ability to commercial finance. Build large cash reserves, maintain a high credit score, and you can play the big boy games.

Hope that helps.