I own one investment property (duplex, if that matters) - It was quite an ordeal to secure the financing for it: a million questions about what other debt I have, etc. I ended up getting it because I had virtually 0 debt.
Now I'm thinking I want to buy a second one. But what happens when the lender learns I have a 160k mortgage? That obviously is much much more debt than I had last time when I just squeaked by... how does this work? If I can prove that I have tenants, does the lender then ignore/discount the mortgage debt it when qualifying me?
Asheville, NC · Member since 2008 · 107 posts · 10 votes
17y
SB-
I think you are getting ahead of yourself (I know it is easy to do!). You need to first rent out both units in your duplex asap, it is getting very close to the "off season" for renting. You don't want to try to rent it out during the winter. Also, you need to get the feel of being a landlord and see if it is something you really want to do.
Another thing, when you apply for a loan for a second property, part of the evaluation for that loan is that you have been a successful landlord with your first property. You need to rent it out so you can demonstrate that you are capable as a landlord. So get to it!
Good luck!
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
The lender may count the rental income from the first property. Current Fannie Mae rules require the rental income to appear on two tax returns before it can count. Some lenders may be more lenient.
If they do count it, the typical calculation it to take 75% of the rent minus the PITI payment and use that amount for the "net rental income". That's actually a pretty optimistic number, so if that's negative, you probably need to find better deals before buying more.
Unfortunately for me, although I've owned the property for 2 yrs, I haven't rented it out yet (not because it's unrentable, but mostly because I took my time renovating)
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
If you're going to be in the rental business, you better be quicker than that! The last one I bought was rent ready in four weeks, and rented a few weeks after that. That's two years of lost rent you'll never get back.
Asheville, NC · Member since 2008 · 107 posts · 10 votes
17y
SB-
I think you are getting ahead of yourself (I know it is easy to do!). You need to first rent out both units in your duplex asap, it is getting very close to the "off season" for renting. You don't want to try to rent it out during the winter. Also, you need to get the feel of being a landlord and see if it is something you really want to do.
Another thing, when you apply for a loan for a second property, part of the evaluation for that loan is that you have been a successful landlord with your first property. You need to rent it out so you can demonstrate that you are capable as a landlord. So get to it!
Good luck!
Real Estate Investor · East Aurora, NY · Member since 2009 · 70 posts · 22 votes
17y
A bank is definitely going to want to look at your tax return or bank statements to show income from your rental property. If you have none, it's not likely you'll get a conventional loan.
Once you get your current property rented you might have to look into finding a seller that will finance it for you
Real Estate Investor · Lakeview, NY · Member since 2009 · 309 posts · 49 votes
17y
I get concerned if my duplex isn't rented for a month?
Dude seriously...2 YEARS!! (MikeOH style, I love that)...and you want to buy another one? IMHO..get the first one rehabbed and rented, and see if this is for you. Buying a second one is a great concept, but being a landlord can be a real pain in the A$$ sometimes. It's certainly not for everyone.
Real Estate Investor · Lakeview, NY · Member since 2009 · 309 posts · 49 votes
17y
Seriously. Get the first one up and operating first.
You can get a lot accomplished in 3 or 4 "weekenders" as I call them. I'm sure you have friends or acquaintances who have experience in some sort of remodeling or rehab. See if they'll give you a hand for a few days. Buy 'em pizza, refreshments etc...There's alot you can do to save some cash by doing some of it yourself. I don't know how much rehab your talking about, but be proactive and get it done.
Fear of failure? I fear running out of money...lol