All Forum Posts by: Paul D.
Paul D. has started 5 posts and replied 11 times.
Post: How does a mortgage company look at depreciation?
- Milford, CT
- Posts 11
- Votes 2
Quote from @Jacob Sherman:
What you need to do is start using the DSCR loan and all of those headaches and bumps in the road will go away for a slight premium in interest rate . They are no income and no doc . What are some of your scenarios looking like ?
I'm using a VA loan…
Post: How does a mortgage company look at depreciation?
- Milford, CT
- Posts 11
- Votes 2
Quote from @Jay Hurst:
Quote from @Paul D.:
Hello!
Normally, on my taxes, I try to break even or make a little profit BEFORE applying depreciation to the property.
I recently applied for my 6th mortgage, and the loan officer significantly lowered my buying power because he looked at all of my properties as losing money. He stated that he has to calculate my total loss on each property, he said that he can't use the pre-depreciation number.
Is this normal practice? Should I start showing a profit after applying depreciation?
Thanks for the input!
Paul
Assuming your are looking to qualify for a conventional loan there should be NO difference from lender to lender. It is a very simple calculation and yes depreciation would be added back as it is a paper loss. I am amazed of how many LO's simply do not know how to make this calculation. Here is the form that should be used for all Fannie/Freddie loans: Rental income worksheet
Make sure you have someone who knows what they are doing before you default to a more expensive DSCR loan.
Thank you! I'm looking to use a VA loan, but I would assume the same rules would apply?
Post: How does a mortgage company look at depreciation?
- Milford, CT
- Posts 11
- Votes 2
Quote from @Devin Peterson:
Quote from @Paul D.:
Hello!
Normally, on my taxes, I try to break even or make a little profit BEFORE applying depreciation to the property.
I recently applied for my 6th mortgage, and the loan officer significantly lowered my buying power because he looked at all of my properties as losing money. He stated that he has to calculate my total loss on each property, he said that he can't use the pre-depreciation number.
Is this normal practice? Should I start showing a profit after applying depreciation?
Thanks for the input!
Paul
Paul,
Sounds like you are dealing with a traditional conventional financing loan officer. If you are someone who has two or more investment properties, you should learn about the DSCR investment product. These are investment/rental specific mortgage products that don't take into consideration, your income, or the debt on any other property you currently own. Even better, there are no tax returns, questions about income, W-2s, or even DTI! This seems to be what you need in order to obtain the preapproval amount you were looking for to continue to scale. Happy to connect and answer any questions you have. I'm also local to you in Middletown! I work with a bunch of investors across the state of Connecticut. Let's connect!
Thanks for the response, I'm familiar with DSCR, but I'm trying to use my VA loan entitlement for the next deal.
Post: How does a mortgage company look at depreciation?
- Milford, CT
- Posts 11
- Votes 2
Quote from @Robin Simon:
Quote from @Paul D.:
Quote from @Ko Kashiwagi:
Hi Paul,
I'm curious as to what kind of loan you applied for? You can use mortgages that doesn't require much more than credit scores and down payment such as DSCR. If you use a Full Documentation loan, it is common that lenders look at all your income and assets.
I understand that they are looking at income and assets… my question was specifically about how mortgage companies view depreciation on existing properties…
It depends on the loan product, do you know what the specific loan type / mortgage lender you are working with?
Thanks for the response, I'm using a VA loan.
Post: How does a mortgage company look at depreciation?
- Milford, CT
- Posts 11
- Votes 2
Quote from @Ko Kashiwagi:
Hi Paul,
I'm curious as to what kind of loan you applied for? You can use mortgages that doesn't require much more than credit scores and down payment such as DSCR. If you use a Full Documentation loan, it is common that lenders look at all your income and assets.
I understand that they are looking at income and assets… my question was specifically about how mortgage companies view depreciation on existing properties…
Post: How does a mortgage company look at depreciation?
- Milford, CT
- Posts 11
- Votes 2
Hello!
Normally, on my taxes, I try to break even or make a little profit BEFORE applying depreciation to the property.
I recently applied for my 6th mortgage, and the loan officer significantly lowered my buying power because he looked at all of my properties as losing money. He stated that he has to calculate my total loss on each property, he said that he can't use the pre-depreciation number.
Is this normal practice? Should I start showing a profit after applying depreciation?
Thanks for the input!
Paul
Post: Financing an improvement to a property
- Milford, CT
- Posts 11
- Votes 2
Hello,
I have a single family rental, the city will allow me to build a detached garage with an apartment above it and convert the property to a 2 family. The property has a 250k mortgage (4% Apr). and is worth around 380k. I expect the property to be worth around 500k after the additional building. I have a contractor that will do the job for 100k.
What is the best way to fund this project? I have 4 other investment properties, all with equity…. Bridge financing seems expensive. Is there a lender that will finance the project with a long term mortgage? Also, I would hate to refinance the entire mortgage and lose the great interest rate.
Any suggestions are appreciated!
Post: 1031 identifying a property question
- Milford, CT
- Posts 11
- Votes 2
Hello,
I'm currently selling a property and will be utilizing a 1031 exchange. The property will close in 2 weeks. I have found a new property that I want to buy with the 1031 exchange. Am I allowed to put an offer in on this new property now, and then "identify" the new property immediately after I close on the property I am selling? Would there be an issue with the contract date on the new property occurring before the date that I close on the property that I am selling?
Thank you for your help!
Post: 1031 Exchange question - Owner occupied
- Milford, CT
- Posts 11
- Votes 2
Hello,
I'm currently selling a single family rental. Can I use a 1031 exchange to purchase an owner occupied 2 family?
Post: Mortgage Question, moving from duplex to single family
- Milford, CT
- Posts 11
- Votes 2
Thank you for your replies!
All of my properties are financed with conventional mortgages (no fha). I am not opposed to getting an fha mortgage for my next property, just not a big fan of mortgage insurance if I can avoid it.
It would be difficult for me to have a signed lease for the unit I currently live in, as I wouldn’t be able to get a tenant until I moved out. That is my big question, will they (the mortgage companies) count an appraised rental value as income before anyone even moved in?