Debt To Income Limitations

[Brian M.]

My question is on debt to income ratio and how that metric limits your ability to obtain additional mortgages in order to expand your MF residential real estate portfolio.

When I purchase my first MF residential property, with the intent of holding onto to it for the long term, it will be difficult to get approved for another mortgage as I will be close to my debt to income ratio limit.

Are there strategies or suggestions on how to best navigate the debt to income ratio limits for a buy and hold strategy investor?

Thanks,

[Stephanie Medellin]

@Brian M. How you report rental income and expenses on your taxes will have the most impact on your debt to income ratio. Even if the monthly rent covers the mortgage payment, taxes, and insurance (and HOA dues, if applicable), if you're writing off lots of repairs, management fees, advertising expenses, utilities, and more, those additional expenses will reduce the rental income and usually will end up hurting your debt to income ratio.

In the beginning, and in the first year of ownership before anything is reported on your taxes, lenders will use 75% of the lease amount as rental income.  As long as that amount covers the payment, it will not hurt your debt to income ratio.