Questions about financing strategy

10 Replies

Hello BP!

I own a home that I would like to turn into an air bnb. I believe I can make 1.5x what i pay in mortgage for extra cashflow.

Goal is to buy a 2nd home or investment home that I can live in for about a year and then turn into a rental property. Problem is DTI would be right around 50% by buying the second home.

My question is, will I have issues getting financed for a 3rd home since by DTI will be over 50% with already 2 properties in my name? I've heard you had to show 2 years of documents on a rental in order for the bank to even consider..

Any insight or advice is appreciated!

@Jeff Castro

My understanding is if you are profiting on each acquisition and working with a competent mortgage broker each acquisition should improve your DTI ratio because you are increasing your income. There are lenders out there who will also factor in 75% of potential or actual rent on a new acquisition. Maybe @Chris Mason can clarify or correct me. 

@Brian Gerlach thanks for the response. That is what I assumed also. But the lender I'm working with is saying that the rental property need 2 year history to be factored in my DTI. I wonder if that is with all lenders or just his institution.

@Jeff Castro I purchased a 2-unit property for my first investment purchase (ie no experience at all) that was occupied and they used the leases to factor in 75% of the rent to my DTI ratio before ever collecting $1 from a tenant. I imagine it's a bank overlay with the specific institution. It's probably best to seek out a mortgage broker in the future who will have more options as opposed to a loan officer who generally has more restrictions in residential lending. A mortgage broker can shop your loan out to find the right product (ie lender) in the same way an insurance broker can shop for insurance to find you the best value (ie insurance).

@Jeff Castro

I would make certain that rental income of the AirBNB, short term rental, aspect is viewed the same by lenders. I’ve come across information that it’s viewed more so as unstable because it’s not easily predictable vs long term leases. Just a thought.