They use Debt coverage formula and not DTI.

Based on the following formula 1k/100k = .01 or 1% where as 500/60k =.008333 or about .8333% which means that for every 1000 dollars spent on townhomes you return 10 dollars a month in rent where in duplexes for every 1000 dollars spent you only return 8 dollars and 33 cents. 

The net result of the formula is an insignificant amount different if you hold it for long enough.

Basically, they want to see how much rent you're getting compared to the expected PITI of what your new mortgage will be...and they all use different formulas to decide how much money they'll cash out to you based on your rental income.So it's not just as simple as giving you 75% of the appraised value of your property.

But the math is totally different in New Zealand from all the books I read.In New Zealand a family home will cost you $500,000 and you can rent it for $500 per week.Loan interest rates are 6%.With this most of the formulas taught in these books do not seem to apply as the rent basically just covers the loan interest.

I dont think there is any formula other than watching the market and the rental prices, talking with other landlords and your own experience.

Maybe start a REI business on paper and then when you are ready, plug in real numbers into your mock formulas.

This is a key assumption to my problem so if that is incorrect please let me know.The excel formula of course uses the syntax IRR(values, guess)For this example:- Row 1 will hold yearly cash flow for years 1-5.- Row 3 will hold sale proceeds- I will sell the property in year 5 So it will look like this:A1= 100 (cash outflow)B1= 10C1= 15D1= 15E1= 15E3 = 25 (proceeds from sale of asset)Here is the formula I am using to calculate this=IRR((A1:E1,E3))This will return a value but I am not sure if it is the correct way to calculate this because I am not sure how Excel is interpreting these flows with regard to timing.

I was just curious about others opinions because I have had some newer investors from Asheville say they would only pay $160k and I'm wondering what formula they are using because only homes in major need of repairs are 160k and I know from my own rehab projects that and 30 to 60k would need to go in them to get good rent.

Cash flow - lot of numbers - formulas opinions on here regarding ROI/IRR/ My favorite Cap rates.