Working through a DTI problem on a third live-in-then-rent acquisition

Juniper, there's one set of agency rules and then every lender adds its own conditions on top, and there's genuine room for judgment in how rental income gets documented. That's why the same borrower gets three answers.

Anchor, 8k behind three properties with a sewer line already in your history is the part I'd refuse. Not because 47 is a bad number, because 8k is a bad number. One furnace in January and you're putting a roof on a credit card at 24 percent, and then your DTI for property four is worse than it is today. The strategy's whole advantage is that it's patient. Eight months is nothing against a twenty year hold.

The three different answers reflect a real distinction in how rental income can be documented, and knowing which one applies to you matters more than the DTI figure.

When a property has been rented long enough to appear on a filed tax return, underwriting generally works from what the return shows, adding back depreciation and certain non-cash items. When a property has no filing history, the lender typically relies on a lease and an appraiser's rent schedule, discounted for vacancy. Which path a given property falls on is a function of its filing history, not of how good the property is. Property one has two years of returns and will most likely be evaluated on them. Property two has none, so a lease-based approach is the usual route. That is why LO A and LO B disagree, and both may be applying the rules correctly. Reserve requirements per financed property are a separate lender-level condition and they do tighten as portfolios grow. Get each lender's requirement in writing, because these details change and vary by program.

On the numbers as posted: the depreciation add-back is worth checking before you assume LO A's number is punitive. If you claimed significant depreciation on property one, the return-based figure may come out closer to the lease-based one than you expect. Ask LO A to show you the worksheet.

The risk in the 8k version is concentration of timing. You would be closing a purchase, placing a first tenant in property two, and moving yourself in the same 60 day window, with no cushion for any of the three going long. Vacancy on property two while you carry a 2,410 payment and a new 355k payment is the scenario to price. At 8k of liquidity that scenario is about three months from a forced decision.

A tax professional should size the depreciation question for your specific returns.

The line that stands out is a second property renting for 2,500 to 2,600 against a 2,410 payment. That is only a 100 to 190 spread on a property that still needs a tenant placed, on a schedule set by the purchase closing. That is the weakest link in a file like this, and it is the one most likely to get compromised. When a lease is needed by a date, the applicant in front of you gets taken. Take an investor who did exactly that on a fourth property, accepting a tenant with a 611 score because the lease was needed for the next loan. Fourteen months of partial payments and a filing followed, and the cost ran well past what that loan was worth. It's a pattern worth guarding against deliberately rather than trusting willpower in the moment.

Orchard and thicket are both saying wait, and that's mostly right, though not for eight months and not for the reasons given. Killing the car note does two things at once, it drops 480 of monthly debt and it lets property two season into a filed return. That's a different file, not a slightly better one. LO C is worth pushing back on. Six months reserves per financed property isn't a rule every lender applies the same way, and three lenders on a file this specific isn't finished shopping. Talk to two more, and get each one to put the reserve requirement and the rental income method in writing before paying for an appraisal.

355k on 118k of income is where it's worth stopping to look at what's being bought rather than how it's being financed. At lower price points, a 355k purchase would be three houses. The owner-occupant strategy does push toward retail pricing on ordinary houses, and that's the trade, retail pricing for the financing. But a house that thin on day one takes years of rent growth to become anything, and those years get funded out of the remaining 8k of qualifying room.

Waiting eight months costs one acquisition cycle. Running out of cash across three properties costs a property and the ability to borrow for years. That asymmetry is what settles it.

Here's the unglamorous version of the question. What is the 335 a month on property one and the 130 on property two actually for? Two properties producing maybe 465 of spread before any repair, a car note at 480, and a third acquisition on the table. When does this start paying instead of asking for money? Anyone running the same strategy should want income without a second job. Right now this looks like a second job that pays negative.