When you but one duplex does that income put you in postion to buy another?
How do you go from one property to the next without selling?
How can you buy many properties and not over extend you credit?
Most banks will allow 80% of the rental income to be added to your income. That keeps the debt to income ratio in line. You will need signed leases and a receipt book. The credit takes care of itself if you make the payment on time regardless of when the rents come in.
also some lenders will want to SchE of your taxes to verify your income numbers.
Thank you.
So take out the factor that I have a job for this next scenerio.
If I own one duplex and apply for a mortage a second duplex. They allow me 80% of the income on the second duplex to be added to my gross income. So this means that I have to profit at least 20% on the first duplex to get the second right? So, If I don not make a significant positive cash flow on the first duplex, I will not be able to qualify for the second?
No what this means is that if you make $100k per year and you have 10 houses with total notes of $10k/month. You don’t qualify for another mortgage. But if you are leasing them for $1000/month then they will add $8000/month back to your income and you qualify with enough income to get then next mortgage.
I aqquired several properties in four month’s by moving fast. I would settle on 2 properties a month and have two more lined up before the last two hit my credit report. This would allow me to easily qualify for mortgages .
dun-deel
There’s several pieces of information here that are innacurate. Let me first start by saying that there are programs available for reducing the income documentation needed for qualifying. So if your credit scores are high enough you should never need to be concerned about debt ratios.
When an underwriter reviews your file they will need you to produce tax returns and leases. The rental income claimed on your tax returns is what will be used. Most times this will be a negative figure. If a property has been owned less than 12 months and doesn’t show up on the returns, it’s usually acceptable to use 75% of the lease income. (80% is not the norm)
As I mentioned before there are programs such as stated, no ratio, and no doc to accomplish financing.
It should also be noted that failure to disclose ownership and mortgages of any 1-4 units could be construded as fraud. I’m not trying to make accusations rather educate those who may easily be misled by mortgage professionals lacking integrity.
Thanks everyone.
So if I qualify for a duplex from my income from my job and profit $400 a month on that duplex. Then I want another duplex with a $1000 total montly note and an income of $1500 a month, would I qualify using this formula $400 + (.75 x 1500) 1125=1525. I know that this is not how it works. I just want to know how to get from one duplex to another. Also, in this example assume my credit is good.
Assuming you have good credit and are going full documentation on a loan…
You can use the current rental income and the future rental income of the new property also. So if you have a property you are renting for $1000 a month figure 750 - 800 is income. Than you would also get about the same on the new rental (providing the rental is $1000 per month). That is used along with any other income you have so you can qualify. If your properties are producing positive cash flow thaqn you really shouldnt be concerned with qualifying for a loan.
Thanks so much.
So they they take 75% of your current rental income whether it produces a posative cash flow or not? Then if it produces + cash flow you are in better shape?
I am sorry for ao many questions but I feel like I am learning alot.
they are going to use only 75% of the income whether it is a positive cash flow or not. That is what they use to qualify the loan.
75% from the income of duplex 1 toward buying duplex 2.
And 75% of income duplex 2 for the purchase of duplex 2.
Right?
Listen I am not really this stupid. For some reason I am not grasping this. I know about using the income from a prospective purchase for that purchase. It is the other part, using the income from a already owned duplex.
I can help clear this up for you. It’s sound more difficult than it really is.
The main thing to consider is the fact the debt to income ratios shouldn’t matter anyway if you have good credit. You’re racking you brain on this one and you really shouldnt be. That’s what a great mortgage consultant does for you. Just like a CPA knows all of the tax laws or a real estate attorney knows his stuff, you shouldn’t need to try learning everything. Have your professional circle and let them do their jobs so you can find properties and negotiate deals.
let me make this easy. they calculate your debt to income ratio. In other words the percentage of your income that goes to pay your debts. (3000 income and 1500 debts is 50% Debt to income ratio)
So they will use 75% of any rental income as part of your whole income. say you make 3000 a month at work. and 1000 on each rental. so they would count the 3000 gross income and 75% of the rental income ( 750 ea property) to make a 4500 a month income for you. Out of that total income you have to qualify for a loan. So they look at the total income and total debt and see if the number matches or is lower than what you need to qualify for a loan.
So they will account you income on the rental to your debt ratio. Its not about using it to buy one house or another. its just all part of your income to qualify for a mortgage. however banks will allow you to count future rental income of a property towards its purchase of that property.
The bank understands that its an investment and will be rented. so showing a lease or a rental comp for the property will show the rental value that will be used towards your whole income and help you qualify for buying the property.
I hope that cleared it up for you.
Yes, you did. Thanks you.