My wife and I are thinking of buying a multi-family and living in one of the units. We would be first time buyers and applying for a conventional loan. Do banks factor in potential rental income at all when deciding how much of a mortgage we would qualify for? One of the ones we're looking at is fully rented with all renters on month-to-month leases.
We got started doing this. We used FHA financing and qualified on our own income. The banks probably won't look at potential rental income anyqay, so I would forget about it. We put 3.5% down on our first duplex and lived there about a year and two weeks (one year is the minimum). I now own this duplex and rent it out, with a $700/month positive cash flow.
I don't necessarily agree. I think it depends on the area and type of property. My duplex was bought at 1% and it's one of my best rentals. Taxes and insurance are cheap, vacancy is nonexistent, and it's almost new and maintenance has been dirt cheap. I bought it at $165k in an area in which it will easily sell for $100k/side. Right now I am cash flowing $350/side on the place and that will go up to about $400/side after I refinance soon. I put new paint, carpet, and tile in them when I bought them, but other than that I had a microwave fail and that's it for maintenance. Keep in mind that's on a $5000 initial investment. That's a 100% cash on cash return. I would analyze your situation like you are paying rent to yourself at market rate.