If you want to buy and hold properties how does one qualify?

[Jean Pierre]

I'm looking into buying a condo to keep for a year and Rent and buy another one. How does one qualify for the next property and be able to keep the existing one? 

Let's say I have an income of 120k and min payments of around $300. It looks like I qualify for around 500k If I buy a 380k condo that I can live in for a year and then rent. The rent will cover the mortgage. This is in south Florida, so I won't have much cash flow if we use traditional formulas. Let's just say that I can rent it for 3k, and all my costs will be 3k. Basically, $0 cash flow on day one. My understanding is that when you are getting qualified for your next mortgage, you will need to have a signed lease for the income to be included in your next property, but how does it work?

Do they just remove that 3k from my dti or do they remove 70% of the income from my DIT for example 2100 making my now min payments be around 1200 reducing what I qualify for on the next property?  

[Dan Schwartz]

@Jean Pierre your lenders and mileage may vary, but….

-buy the first house with <45% global DTI.

-if you will live it in for a year, you can get owner-occupied rates and down payments (as low as 3%). I one year is kind of the standard for “that’s long enough,” but I haven’t asked a lender that in over 10 years.  

-2nd house is a little tricky since you need a signed lease and deposit payment.  After you have more experience and show some Schedule Es, this gets a little easier.

-75% of the rent amount less your PITIA and MI is added or subtracted to your DTI. If you have 97% LTV mortgage it might be hard to have this be additive to your DTI. Again, the second home is hard.

-recalculate your DTI excluding rental income/loss, then add/subject the amount of your rental income loss. This is your new DTI. E.g. you make $10,000 a month. 45% is $4500. You have a housing payment of $2,000/mo and $300 in monthly payments on your credit report. You have $2,200 left to fund a new PITIA. You calculate 75% of your lease rent less the PITIA and MI as -$600. Now you only have $1,600 for your new PITIA.

I may not have all of this 100% accurate, as I’m not an underwriter, but this what I do to pre-qualify myself.  By the time I’m talking to my loan officer, it’s just to see exactly what paperwork/statements they need to see to underwrite.  

It gets easier as time goes on.  That’s the beauty of long term real estate acquisition.  

Good luck!