Starting out as landlord and financing?

Question

I currently own a home but would like to purchase a duplex and rent out my house. When looking at financing, would I be able to include the potential rent from my home as income? Would I need it to be rented prior to seeking financing? I am interested in using a 203k loan on my multifamily unit, but multifamily can sometimes be hard to find. I have considered building a new duplex. Is that a wise option? I live in Greenville SC. I am looking to refinance my home in coming year when I hit 20% equity.

Here are the financials.

Current home value- $105,00

Current loan Balance- $89,00

Current income- $65,000

Estimated income from rented home- $12000/yr

Property I would like to buy- $150,000 or less.

Here are the financials.

Current home value-    $105,00

Current loan Balance-   $89,00

Current income-            $65,000

Estimated income from rented home- $12000/yr

Property I would like to buy-    $150,000 or less.

Melissa Kirchhoff · Answer

Account Closed - Most lenders require you to be a landlord for 1 year + before you can count rent as "income". (Yeah, I got myself into the same thing, I was amazed if I had a 1 or 2 year lease, they wouldn't take that and count it but as long as I had been a "landlord" it was fine, but, banks you know?)

What I would say is talk to a lender before you plan too much. I did the same, lots of planning and figuring, and it didn't work out because of the lender's rules. So talk to a few different ones, find one you really jive with, and create a relationship now. They will be able to help guide you around the financial difference of the different loan types (203k have lots of restrictions that many people don't realize and lots of criteria for being able to obtain as well --- though they are awesome so don't not do it, just make sure you know all of the rules and restrictions first) and the financial pros and cons of new construction.

At the end of the day, it's going to come down to the numbers (cost versus what rent you can charge) so talk to a lender and get those numbers -- then come back here and we will love to advise =)

Good luck!

Matthew Porcaro · Answer

They can definitely run projections, my lender did it on my refinance before I even had anyone in the property. It is a slippery slope though, there's a lot of proof you need to provide to get past the red tape.