income to expense ratio

[Yehoshua S.]

Does income to expense ratio matter in purchasing or future Cap rates or does net rent=net rent regardless?

[Kristen L Garner]

Like @Khemraj Sarju Jr. stated, income to expense does matter. The DSCR ratio is calculated by taking net operating income (monthly amount shown on your lease or on the 1007 page of the appraisal) and dividing it by total debt service (monthly principal, interest, taxes, insurance, and HOA if applicable of the property). For most DSCR products you need the DSCR ratio to be over .75 to get the deal done. Your options get much better if the ratio is over 1.0. And if it exceeds 1.29 you start to see better rates.

It also matters in conventional lending because those same numbers are calculated into your overall DTI. For the new subject property...75% of the projected rental income can count towards your income and the monthly PITI payment will count towards your debt.

Best of luck!