Will a commercial lender consider my rental and flip income for financing?
I can't get financing on 4 unit dwellings because my DTIs are not good enough. They don't take into account the money I make from rentals and flips as it's considered passive income. If they did I would probably be able to finance any property I want. I was thinking in going 5+ units in hopes they consider my rental and flip income. I have 5+ yrs doing rentals and flips. Any input would be great.
[{"id": "cg3yh6x", "text": "The 5+ unit financing will depend on the ability of the property to service debt first and your income second.\n\nYou will need a debt service coverage of at least 1.20X, which is the Net Operating Income divided by the annual payment of principal and interest. Most commercial loans on apartment properties are done based on a 25 year amortization and with an 80% loan-to-value/cost.\n\nIf your income is being reported in your income taxes, I would not see a problem with it as long as your property cash flows. If the property does not cash flow, I would not touch it as it would be a guarantor dependent loan, which do happen but only in special cases. Then again I work in a commercial bank, which is regulated. Other financial institutions might be less risk averse. \n", "replies": [], "depth": 1}, {"id": "ch6d3lf", "text": "Hi, a 4 unit dwelling can be done as a residential property. I used to be a mortgage banker, in the heyday I could use 125%-150% of the rental income to get you the loan. I know things are more stringent now, but I would wager that a residential mortgage banker/broker would be able to use at least what is being collected on the property to qualify you. \n", "replies": [], "depth": 1}]