Investing after buying personal home.

[Vernon McCarthy]

I am currently trying to buy my first home but I also want to get started in real estste investing. How hard would it be for me to get financing for a investment property after buying my primary residence.

[Nick G.]

Hi there @Vernon McCarthy. It's actually easier than you might think. The lender will check your debt and your income as always, and along with your other assorted debts, they will hit you with the debt of both your current property payment plus the payment of the one you want to buy, since they have to make sure you can afford the payments on both.

However, the really nice part is that a good lender can credit you with 75% of the rental property's income as personal income. 

Here's what that looks like: Let's say your current house payment is $1,400/month, and the payment on the rental property you want to buy is $1,200/month, and it would rent out for $1,500/month. The lender needs to make sure you have enough income to afford the combined $2,600/month of payments for both properties. However, since they can credit you with 75% of the rental property's $1,500/month income as personal income, they are able to count $1,200/month of that future rental income as income you can use to qualify off of!

If you notice in my example, the investment property's payment was going to be $1,200/month... and the lender was able to credit you with $1,200/month of the rental income as personal income. What that means is that, in this example, you would not need to show any more income in order to buy the second property, you would just need enough income to be able to still qualify for your first property's payment. Pretty cool stuff!

Hope that helps.