HELOC - Debt to Income Ratio

[Randy Stuart]

Plan:

Looking to get a HELOC to purchase an investment property. The Wholesaler wants cash only, so my plan is to get a HELOC to purchase and then refinance to with a cash back refinance mortgage after renovations are complete. This will get me the cash back to pay off the HELOC, and then hopefully to repeat the process again.

Background:

I have several other rental properties already. My existing properties have 30yr conventional loans on them, they are all leased and cashflowing. I make good W2 income, and have good equity in my primary residence,

Question:

Are there HELOC lenders that are not concerned about Debt to Income ratio? My other rental properties are bringing my debt to income ratio up higher than my lenders want. Do you have a recommended HELOC lender that understands that landlords will have high levels of debt, but if the debts are on are cash flowing assets, that is a good thing.

Thanks for the advice!! 

[Kevin Romines]

Hmmm, well rentals generally don't add much if anything at all to a person debt ratio, because they are offset by the rents. 

If you have owned them long enough that they show up on your tax return (typically schedule C) then they will analyze your tax return to determine your income. When they do, they will be adding back depreciation and major one time capital improvements and things of that nature. So even if you show a loss on your tax return, it could come out as positive income on the analysis?

And when they analyze your tax returns, they are already counting the mortgage expenses for the rentals in that mix, so a positive number is after counting those debts? I would have a lender that knows how to calculate tax returns that have rentals on them, do an analysis and get the true number before making the assumption that your debt ratio is to high?

The HELOC lender will know how to do this. Good luck, I hope this helps?