Do they have other sources of income for retirement?

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall loss.

Lenders want to see income, not negative cash flow, even if the loss is just on paper from depreciation.

You can typically count 75% of the previous rental income (from the units you will not live in) toward your qualifying income.

How are you determining income, avoiding fake paystubs & employment?

So as a whole your rental losses can offset your agent income. 

Debt to Income Ratio will be used for more conventional types of financing (Fannie/Freddie).

It is now treated as a former passive activity and those prior losses can only offset income from that same activity going forward. 

@Tim RogersI believe there are income limits that if you exceed specific income (cannot remember the number) it greatly reduces or zeroes out any deductions from a REPPeople a lot smarter than me can confirm

An IRA would pay a small tax on such unrelated debt-financed income.