Wholesaler · Newark, DE · Member since 2011 · 50 posts · 4 votes
If I have been taking a loss as the house is empty while it's on the market. Will it hurt my chances to get another loan this year as my schedule E will show a slight loss on paper once the units are all averaged. The place will be sold by the time I go to buy another property adn the rest of them cash flow very well. ( by bank standards one makes 1480 after rent8.75-PITI, another about 800 after the same, I know that's not the real cashflow but for qualifying it will be bonus to my DTI)
should I not show the loss on my taxes and just eat it (since I don't want to risk not getting a loan if it hurts my DTI) or will it not matter to the bank since it is sold and was sitting empty since I am looking for a retail OO buyer.
Sorry if this is a dumb question- I am finding differing opinions on this and a few of the mortgage people I have dealt with in the past have been pretty clueless for underwriting anyway.
I figure since the property is sold they will not care about it since there is a valid reason for it sitting empty for a few months to sell to an OO, they will only carre about the properties I still own when applying for the new mortgage. Please correct me if I am wrong.
Thanks
Ben
Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
14y
If you took it "out of service" in order to sell it, then you can no longer take any expense on your Sch. E anyway. The expenses will go into the basis and reduce your gain (or increase your loss) when you sell.
Wholesaler · Newark, DE · Member since 2011 · 50 posts · 4 votes
14y
thanks, This is the first year I sold any rentals.
To follow up though. If I had a rental that was losing money on paper (lots of repairs and some lost income in between tenants) after i sell it will a mortgage broker take that into account to be able to show the income on my schedule E. As in since thta place is sold now and I am not using it in regards to applying for a loan will it not effect it or will they still look at as if I have this negative cash flow from the unit going forward since it is on my schedule E for this last year?
Sorry if this is a repeat of the question. I guess I am looking to hear from someone who knows underwriting well. many times I get contradictory info or just plain wrong from the first round of loan CSR's.
Thanks Ben
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
Based on my understanding, conventional underwriters will typically average your total (line 22) income for the past two years to arrive at your income number used to calculate DTI.
So, if you had rental losses, this will impact your ability to get loans. That said, underwriters will probably factor back in depreciation, so perhaps your loss won't be as bad in terms of underwriting guidelines.