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On a side note, I suggest often that everyone wanting to be a REI understand what banks want, and how they underwrite loans. This way you can structure your deals accordingly and there will be Roshe Run Unisex less stress when approaching banks for financing.

Let's say I had a building worth 100K, with a 75K loan, 16.5K of income, Nike Roshe Camo Womens

Do you know exactly what gets counted as debt? Aside from consumer debt and mortgages for personal residence, do they count things like lines of credit, active credit cards, etc? For my personal situation, I have no consumer debt, currently rent an apartment, and have a conventional loan on an Nike Roshe Run Mens Dark Blue

And what is called a Global DSCR, which includes, all forms of income, and all forms of debt, personally and corporate (if Roshe Nike Womens Floral

Jon Holdman, Flying Phoenix LLC

2) For the investment properties you've held for 1 or more years where they are on your schedule E they will use the the income and expenses from this schedule. Good news is they add in any paperlosses like depreciation and any 1 time expenses such as a new roof, new kitchen, etc you can prove with organized receipts.

A DSCR on the property your looking to acquire, in the current economy 1.20:1 is typical, but this will change based upon loan size and economy. 1:1 was actually common pre crash.

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Now, it is entirely possible that a bank would cut you off at some point because they've reached some limit for what one person can borrow.

you have corps).

I actually have the exact spreadsheets he uses. I recently did a deal with another bank, and when i gave him my global DSCR spreadsheet he realized he was dealing with a fairly sophisticated investor.

Examples. Assume the you have $1000 a month in non rental debt and $4000 a month in non rental income.

Jon Holdman, Flying Phoenix LLC

How does a lender look at that? Is it as simple as 5K Debt Service / 16.5K of Income for a 30% Ratio? If so, is that a 'favorable ratio' as far as getting more loans that could create the same numbers, assuming I had 25% down for them?

Many people are mixing DCR which is a commercial ratio vs a DTI being a conventional loan ratio. DCR is NOT used when calculating conventional loans.

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The bank I am working with now calculated it differently. I think they counted PITI as debt, then took 75% of the gross rents and applied it to income. It didn't prevent me from qualifying, but after playing with the numbers for a bit you realize even if you keep acquiring rentals that cash flow, your DTI will keep increasing, eventually pushing you over the acceptable limit.

The properties I am talking about would be mostly 1 2 units, and when I am referring to 'acquisition costs' that would be the 'all in costs' after any needed repairs etc. I will look things through in more depth and see where the differences are. Does this give lenders any 'peace of mind' as the evaluate the rest.

1.20:1 is what my banks wants me to show for both.

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I believe, though I'm not a banker, that if you're buying SFRs with conventional loans they're going to do the DTI calculation. If you're buying commerical properties or apartment buildings, they're going to look at DSCR. I think, though this I really don't know for sure, that if you're buying SFRs with portfolio loans they're also going to look at DTI.

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investment property that easily cash flows. So my DTI is . zero?

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1) If you own the property for less than 1 year (AKA not on your tax returns or is the subject property the formula is: rent x 75% PITI = usable income. The property must already have a tenant and you will need to produce a rental agreement. So other documentation may be required.

Your example, Bryce, is why I would really advocate sitting with your banker and saying "please help me work through these calculations".

So far I have only bought property within my SDIRA on a cash basis, so have not needed to work with lenders. Soon I will be buying one or more rentals outside of my SDIRA, using 'conventional financing'.

The way you can try to get an answer is to actually ask the broker or lender. Be specific: "could we please work through the calculations you will use to qualify me?" Asking vaguely stated questions will get you unreliable answers and ugly surpises later in the process.

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Now, account for the rentals. To do this you need the net rental income. For existing properties this is right off your tax return. Savvy lenders add depreciaion back in since that's non cash. For a new property, lenders estimate net rental income as (rent 0.75 PITI). Now, is the net rental income positive? If so, add it to the income in the calulation, improving your DTI. Are you running at a loss? If so, add the loss to the debt.

´╗┐How to Lenders figure DTI Ratio on Rental Units

The question I have in regards to DTI Ratio's is this; say I have 1 or 2 rentals that I have held for a year or more with a good rental history etc. and I would like to look into buying additional properties. I DO understand the 'personal side' of my regular income vs debt. but not the rental business side.

8,25K of Operating Expenses, 5K of Debt Service for a Cash Flow of about 3.25K a year.

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If you think about it, if the rental truly is cash flow positive (after all expenses, vacancy, and capital, NOT just rent > PITI) then owning the rental improves your personal income statement. Saying "sorry, no more loans for you" is the same as saying "you're making too much money". I have a friend with a couple dozen rentals, most financed by the same local portfolio lender. In chatting one day he said "the bank just keeps giving me money."

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