Michael Dunn the debt on the house is considered and most lenders will allow you to claim 75% of rental incomeSome require 24 months of rental history and others have shorter time periodSpeak with several lenders to get the skinny from them

Commercial loans will also have generally higher interest rates, shorter amortization periods and balloon payments due at the end of the loan term (often ten years or less).If you can get them, conventional mortgages are the way to go.

@Jason Hernandez  Is the shorter amortization period causing the higher mortgage payment?

So make sure you're not comparing a 5 YR IRR to a 3 YR IRR, because that's a huge difference on these value-add projects that bump up the shorter term IRR. 

When running your numbers remember - this will have to be a commercial loan, it will have a higher interest rate (maybe 5.5%) and a shorter (maybe 25 year) amortization schedule. 

It was a shorter term situation (couple years) and they made lifelong friends in the process.

Banks are market by market but typically around 5%, some are struggling to get to 10 years and may have shorter ams.

Vacancy runs like a mini office but with lower quality tenants and shorter leases.

You go commercial and have the different structure, variable rates, shorter terms... 

Certainly longer is better than shorter.