All Forum Posts by: Derek Daun

Have you taken into account the principle payments made each month? 

@Chris Mason 

Thanks for posting that link to the Fannie Mae guidelines. 

https://www.fanniemae.com/content/guide/selling/b3...

This finally clears up for me how rental income is debt is calculated for DTI ratios. Obvious every bank can choose there method, but based on that webpage the math is:

Add up you monthly gross income, before income tax.  (W2, ect). Don't include real estate income. This is income.

Add up all your monthly debt. (Car payments, student loans, primary residence mortgage, ect). This is debt.

Now for real estate:

Calculate monthly RENT mulitplied by .75. Then subtract all your monthly rental PITI (Principle, interest, tax, insurance. This is likely your mortgage amount). If the resulting number is positive (you're a little cash positive) add it to your income. If this number is negative. (You're a little cash negative) add it to your debt. Your mortgage payments are now accounted for, and don't affect debt in other ways.

So as long as you're roughly cash positive, buying rentals won't affect your DTI.

@Matthew Olszak the problem is the owner. The tenants are harmless. The issue is that the owner is mentally unstable and creates problems and then lashes out on others on the block. 

@JD Martin normally I wouldn't insert myself in a problem between tenants and neighbors, but in this case it could be become a liability to the property. Were my tenants decide to leave because of it, a problem next door could affect appeal of the property.

@Kyle J. thanks for the link, that's what I needed!

We have a crazy neighbor next to one of our rental properties. And when I say crazy, I mean the term literally. Last night she was yelling and screaming at our tenants from outside.

I bought the house in 2015. At that time the house next door was boarded up, and I saw that as a good thing. (We get our house cheaper, and based on the neighborhood, a boarded house is likely going to get snapped up to flip. I thought I might even by it) Eventually I meet the owner and it turns out no dice. She inherited the house which is almost paid off, and her kids were raised in the house as well, leading to high psychological attachment to the property. In talking to her, it didn't sound like she had the mental capacity to deal with a house though, hence it was boarded up.

Fast forward to six months ago, when the owner converts the house into an assisted living rental for the mentally disabled. That's a common scam slum lords pull around here, as it's a good way to milk the city for money. This soon becomes an issue, as the owner can't handle being that type of landlord. When ever she'd come over, she start screaming at the residents, causing them to come next door asking for help. The police have been called multiple times by other neighbors (not my tenants). The owner is now upset at people living on the block now, since the police were called leading to last nights confrontation, which lead to my tenants actually calling the police.

Any thoughts?

I can probably make this, if I'm not helping my wife host her boss.

Three months ago you could find deals on the MLS in Sacramento, but for the most part you needed cash if you wanted to compete. Right now on market 'deals' have pretty much been priced out even if you have cash. I'm guessing the direct mail market is probably getting fairly saturated as well based on the number of post cards I get in the mail every month. Right now I'm just sitting tight till Fall to see if something pops up as the seasonal trend diminishes.

Dang, out of town on vacation. Have fun. Next time hopefully.

You calcs on the right show a person with extremely poor spending habits. Yes, there are lots of people like that out there, but they aren't the ones buying houses. The main reason is that spending like that makes sure they'll never have enough for the down payment and two months of expenses to qualify. 

We still have a huge amount of pent up demand for housing, and right now, for the most part, it's those people that have better financial statements that are buying. 

Yes, the next crash is coming, but it might still be a couple of years out. It will likely vary more by location next time, and will likely show a lot more price stalling compared to crashing depending on where you are. 

@Merritt Whitman Sorry I'm an idiot. I was mixing up my regular financing and cash out financing. I think I was only able to get 75% for the cash outs. It was the purchase mortgage where I got 80%. Sorry for getting your hopes up.

I've done multiple with Wells Fargo and Chase at 80% no problem. Interest rate is a little higher than if I chose 75%.