DTI too high because I don't have two years of rental income yet?

[Greg Gaudet]

Hey all,

Just closed on my 5th unit in my first year! Stoked about it! It was a great deal; it's worth 100k as is, 140k ARV and I got it for only 30k, so I just paid cash. Now I'm getting a heloc (because Bank of Hawaii offers a fixed rate heloc for 25 years at 4.7% and 85% LTV since it's first position - pretty great terms!). The problem is that BOH is telling me that they will not count my rental income on any of my 5 rental units until it's on 2 years of tax returns.. even though I showed them signed leases and my General Excise tax fillings (Hawaii's tax on all income) showing that I collected 30K in rents.

Thankfully my DTI is still low enough to qualify for this one without the rental income (they reported my DTI being at 24% by their calculations today), but of course they are counting all of the debt on the units against me. So they count the debt against you, but don't consider the rental income. So even though the rentals are creating more income for me, the bank sees them as decreasing my income. This is especially concerning for me because the liabilities on each unit are about $1,000/month. So 5 units can take a really big chunk out of my DTI if you're not counting the $8k/month those units are generating!

I've shopped a bunch of banks and they all said the same thing.. 

So I'm wondering who else has faced this issue and how have you worked around it? I want to buy a few more units this year but I'm starting to wonder what my DTI is going to look like to the banks when I apply...