Debt to Income affects with Rentals

[Brandon Cronkhite]

If I buy a rental property with a loan, create positive cash flow with a rental, does this reduce my ability to then get another loan for another property? I’m just getting started and trying to create a strategy beyond first deal. Any and all opinions are welcomed and appreciated!!

[Lionel Li]

Originally posted by @Brandon Cronkhite:

If I buy a rental property with a loan, create positive cash flow with a rental, does this reduce my ability to then get another loan for another property? I’m just getting started and trying to create a strategy beyond first deal. Any and all opinions are welcomed and appreciated!!

It's good that you're thinking with the end in mind. Lenders typically review the last two years of your tax returns, 1040, Schedule E. They will require a copy of your lease agreements to verify rental income of your current rentals if you want it to be included in your gross income. They'll typically only count 75% of gross rental income to account for the vacancy factor. If your DTI is the issue, then find a lender that will use rental income 'not yet received' because you are buying a property for rental use. Along with the appraisal lenders order to determine the value of the property you're buying, the lender should order a rent schedule, that will show comps for current rent values.

This just reinforces the importance of a steady W-2 income during the beginning stages of building your rental portfolio.