Existing rental properties count as debt or income for new loan?

[David Rutledge]

Hi everyone,

So I am starting to get the ball rolling on my next investment and I am trying to gain some information as to what I can expect to be able to borrow with my current situation.

I am toying with a few ideas. I am thinking about getting a primary residence here in OC with a conventional loan of maybe 5% down or I am also thinking about buying a property outside of OC either in California or inter state as an investment property and putting 20% down.

Irrespective of which strategy I end up going with I was hoping you may be able to answer a few questions to help me get some idea of my borrowing capacity right now.

I purchased two investment properties outside of California in September last year. Both have tenants in place and are rented. I spoke to a bank here in CA a few months back and they indicated that because the rental history of the properties is so limited that most lenders would consider the properties as a wash i.e. not count as a debt but also that the rental income from the properties would not be counted as income therefore basically adding nothing (positive or negative) to my debt to income ratio. I would have had rental income from these properties for about 12 months by the time I am ready to apply for my next loan.

I am wondering if anyone has any experience or knowledge with this type of issue. For people looking at getting investment loans do you know how long do existing properties need to be rented before they can count as income and would lenders potentially count these as a debt, or perhaps neither?

Any help or insight would be very much appreciated.

Thanks so much.

David