Rental Exepsnes and Debt to Income

[Todd Ashley]

Hi all, looking for a quick overview of which type of rental expenses counts against your debt to income ratio and which do not? For instance, I am assuming that any utilities I pay are a straight expense, but what about materials for a kitchen remodel? I assume those would be depreciated and would not count as an expense against income for loan qualification purposes?

[Ned Carey]

@Todd Ashley it depends, are you talking about a loan other than a loan to purchase or refinance an investment property? Or are you talking about some type of personal loan and you want to know how your investments will count against the personal loan?

Even given the above it will also depend on the lender.

But regarding improvements that increase the value of a property they are "capital expenses" they should not show up in any evaluation of profit and loss (income and expenses). They are Balance sheet items. In other words they show up as part of what you own vs what you owe. A outflow of dollars for any for "capital expenses" increases your net worth.