Debt to income ratio when you have rental properties

[Frandizon John Reyes]

How do you calculate debt to income ratio when you have rental property? Are we using gross rental incomes or net? I own two 3-unit buildings in the Chicago area and live in one of the units. Total gross rental income is $7,000/month. Mortgage for the two buildings are $2,450/month and $2,750/month for a total combined mortgage of $5,200/month between the two. My net rental income is $1,800/month. Are we using the $7,000 gross rental income number for the denominator in dti calculation or the $1,800 net income number. Any help would be appreciated.

[Cameron Tope]

@Derek Harris is correct - most banks will take a percentage of gross rents (70-80%) assuming that 20-30% of gross rents will be used for expenses. 

Therefore your rent income to offset your DTI would be between $4,900 to $5,600 ($7,000 x 70-80%). To some banks you would have a negative cash flow.

Hope that helps!