Getting financing for my second rental property

4 Replies

I currently own my personal house with no mortgage, and I recently bought my first investment property which is a 3/2 condo. The condo is already rented out with a one year lease. My questions is, how long will I have to wait to buy another investment property. I have money for a down payment but with the condo my debt to income ratio would be to high to qualify. How long do you have to have rental income for the property before it no longer counts against you and actually counts as income?

@Travis Chaney

I am not an expert on this but from experience, if you are going through a conventional loan, I would give it a year before applying for another loan. If you are cash flowing well with the first rental, then your DTI ratio should favor you. Just in general, you would want to wait a year to see how well your property is performing before diving into another one.

I agree with Brian although many portfolio lenders would lend quickly if you have 20-25% to put down. 

A cash flowing property benefits your DTI once it's been flowing long enough to hit your tax records... so realistically, you'd likely want/need to wait a year. Of course, you may not have to, but expect your interest to be a bit higher regardless of credit.

Originally posted by @Travis Chaney :

I currently own my personal house with no mortgage, and I recently bought my first investment property which is a 3/2 condo. The condo is already rented out with a one year lease. My questions is, how long will I have to wait to buy another investment property. I have money for a down payment but with the condo my debt to income ratio would be to high to qualify. How long do you have to have rental income for the property before it no longer counts against you and actually counts as income?

 Hey Travis,

You can buy another investment property right away using conventional financing assuming you have sufficient down payment, credit, and down payment/cash reserves to qualify for another property.

You can use your rental income to help offset your monthly PITI. The formula is simple and is as follows, 75% of gross rent - PITI = net rental income.

If net rental income is positive its added to your total income and improves your purchasing power.

If net rental income is negative then its considered a liability similar to a credit card or a car loan that you gotta qualify for.

Some banks have "overlays," or additional requirements they place on top of borrowers when you have rapid acquisitions of multiple properties but by no means is 2 properties in one year considered "rapid," by most lenders, however 3-5 would be its an underwriter and case by case bank "call," to make.