How do appreciation investors satisfy Debt Coverage Ratio

[Alexander Monnin]

So I was wondering how appreciation investors satisfy the debt coverage ratio?  I keep seeing that banks require a 1.2-1.3 ratio.  I know that a lot of appreciation plays barely break even on cashflow or are sometimes even negative at first.  Obviously this would not satisfy the ratio requirement.  So are there ways to work around this?  Do I just have to find a small investor friendly bank?  Will banks overlook this if I have a high enough income?  Also, I know that you could just make a bigger down payment but that would be less than ideal for my situation.

[Chris Mason]

People buying for the tax shelter and long term net worth gains more than the short term cashflow tend to have no problems getting residential financing on the first couple cashflow negative properties simply because their 'day job' income is so high.

Eventually they do come up against a DTI wall that cannot be avoided.

How it sometimes plays out is they come to me after having a primary plus, say, 3 rental SFR McMansions. DTI not counting rent, which most lenders don't know how to do, is like 42%. Essentially at the max.

Then I count the rent and DTI improves to 32% or something, giving them capacity for 1 or 2 more.

Then they're at the DTI wall even when DTI is being correctly calculated, including the cashflow negative property they want to purchase (If net rent is $5000 and PITI is $6000, it only counts as a $1000/mo liability, not $6000).

Aaaaaaaand I cut them off and make them buy casfhlow positive MFRs or talk to a HML. And their agent is typically baffled when I tell them that this incredibly wealthy person isn't allowed to buy SFRs any more, only 2-4 unit properties that cashflow. I think most real estate agents regard rental property mortgage math as straight up witchcraft.