Scaling a Bay Area Portfolio

[Michael Hyun]

Hello everyone!

I’ve been trying to figure this out lately, but I recently purchased a negatively cash flowing property. Yes, I know - you should never buy a negatively cash flowing property, but I truly believe in the Bay Area appreciation, so I’m willing to take a negative and pay the remainder.

My question is: how do I buy my next three homes? The problem is with DTI. I recently learned that banks will only consider 75% of your rental income as income. So if I break it down with hypothetical numbers:

W2 Job income(example): 15,000 gross monthly

Rental income from property 1: 3500 monthly

Actual income from rental property 1(according to the bank): 3500x0.75 = 2625 monthly

PITU for property 1: $4200

That means my DTI would be (4200)/(15000+2625) or 23.8%. Is that right?

This is assuming I live with my parents, but if I were to rent a place - add another 1500 for rent.

(4200+1500)/(15000 +2625)= 32.3% DTI.

Now, being in this position, how could I afford another home??