Using existing Rental Income to qualify for Mortgage

Asked by Daniela, Boynton Beach, FL Mon Mar 14, 2011

I've owned the rental property for 1.5 years (mortgage free) and I am about to file my 1st full year tax return. The net rental income is much lower than the gross because I have made major repairs and renovations to the rental property. Now I plan to buy another property which will probably be considered as an investment and for which I will require a mortgage. Will the net rental income be the only one considered as qualifying income even though most of the expenses were not reoccuring operating expenses?

Help the community by answering this question:

+ web reference
Web reference:


Stevens & Ma…, Agent, Centerville, MA
Thu Oct 18, 2012
Depends on the bank, check with your lender.
1 vote
Bob Brubaker, Agent, Lake Worth, FL
Tue Mar 15, 2011
Acheaving favorable tax consequences from large improvement expenses often yield
unfavorable conseqences to strategies critcally dependent on net rental income from other
property. If you made capital improvements and not just " turn around" corrective repairs you may
want to take a write off "mix" of depreciation and operating items. Whoever does your taxes needs to
know your plans. Absolutely ! do not try to do your own taxes or any non CPA either!
That said , there are several qualifying issues you are going to face. Some already touched
on by other writers. These will include but not be limited to the following.

!. Many lenders will take the position that your rental property experience is too new to
to assure consistent net income from your investment and /or your ability to perform as a
landlord. eg a "track Record"
2. Even with a proven ability to perform ( many times 3years plus) what percentage of the
net rental income are they going to allow for qualifying income?
3. What insulating factors can you produce to assure a lender that there will be no
" domino effects " from experience with present investments even if there are "unexpecteds"
What " fall -back " credentials can produce to allay any uncertainty on your ability to repay on
another loan.

These and other issues need to be hashed out with lenders up-front! You have time to
scout around for CPA and Lender Resources Too ! Good Luck!

Web Reference:
1 vote
Michael Some…, , Delray Beach, FL
Mon Mar 14, 2011
So in your case, we will not use the NET rental income as filed on your most recent schedule E. We will use your net rental income, plus any depreciation

Would you like to set-up an appointment to meet and discuss your situation?
1 vote
Michael Some…, , Delray Beach, FL
Mon Mar 14, 2011

If you can prove the expenses on your current investment property are one time expenses, like a new roof, then they will be added back into your income. Depreciation will also be added back to your income.

Please call me to discuss a pre-qualification for your new purchase. I have been helping investors buy property for over 11 years and can help you structure your next purchase the right way.
1 vote
, ,
Mon Mar 14, 2011
Hi Daniela,

Yes, the underwriter will use the net rental income as reported on your Schedule E.

Best wishes,

Elva Wormley
Cobalt Financial Corporation
1 vote
Rebeccatrulia, Renter, United Amigos, Mesa, AZ
Wed Oct 2, 2013
Hi Daniela

Reverse Mortgages are designed to enable senior homeowners 62 years and older to convert part of their home equity into cash. They can do this without having to sell their home or give up the title. Seniors do not have to take on any new monthly mortgage payments either (although they are required to continue paying their property taxes and homeowners insurance). Instead of making monthly payments to a lender, the reverse mortgage lender makes payments to the senior homeowner.…
0 votes
Marsha Mayer, Agent, WEST PALM BEACH, FL
Thu Apr 28, 2011
terrific answers here. Bravo ! I gave a 'thumbs-up' to Michael Somerville.
0 votes
Michael Some…, , Delray Beach, FL
Wed Mar 16, 2011
As posted in a previous answer, I can add back to your income:

1) Any depreciation taken on the schedule E.

2) Any one time repair expenses, like for a new roof or a new A/C.

Give me a call at 561.314.4800 to discuss further.

Delivering the Dream of Homeonwership. It's what we do!!
0 votes
Dallas Texas, Agent, Dallas, TN
Mon Mar 14, 2011
Contact a mortgage broker complete a loan application who can determine if you can OR can't qualify

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes
Lu Cohen, Agent, Palm Beach Gardens, FL
Mon Mar 14, 2011

You will need at least two years of tax returns as well.

Lu Cohen, Broker Associate
Realty Associates
Boynton Beach, FL
0 votes
Search Advice
Ask our community a question
Home Buying in Boynton Beach Zip Codes

Email me when…

Learn more