How much does having loan on your rental help or hurt?

3 Replies

Hello All, 

So I have one rental property with a equity loan on it.  Does it become continually easier to borrow money or harder as I take on more loans?  It certainly adds to the amount of loans outstanding, but it also adds to your income.    

@Peter Grosso  It gets harder as you accumulate properties. The banks go off of your income to debt ratio and generally won't give you credit for he income until it starts to appear on your tax return. Make sure you keep your credit score high as that will help drastically.

Hope this helps ya!

Happy Investing!

@Peter Grosso  

With conventional lending you can use 75% of the rental income from a signed lease in the first year.  Once it shows on your taxes the lender will go off what you report.  If you want to keep buying and are concerned about qualifying, the key is to not show a loss on the sch. E of your taxes.  Your CPA will want you to, but if you pay a little more in taxes now you'll have a much easier time qualifying in the future.

@Peter Grosso The biggest problem you will have is DTI. In my experience as long as you bought right and are reporting positive income on the Schedule E and you keep your personal debts to a minimum you will be ok. Our credit scores have gone up 150+ points since we started 3 years ago - and I think getting loans is super easy as long as my DTI is good

Brie Schmidt, Real Estate Agent in Illinois (#471.018287) and Wisconsin (#57846-90)