It's Hard to Stop at Just One Real Estate Investment

One of the main benefits of owning investment real estate is having someone else “pay for your mortgage” each month. While not exactly paying for your mortgage directly, your tenants do pay the rent each month which you then take from those proceeds and deliver it to the lender. That’s how itbuying more than one property works and why it’s common for real estate investors to own more than one rental property.

Once they find out first hand that it really does work out and the tenants not only offset the mortgage they also make money every month. Money that can be used to acquire yet another property.

Lenders don’t necessarily take the exact view, that tenants pay your mortgage but they do pay close attention to the new mortgage on the rental property when qualifying borrowers. For the first rental property, the lender will now allow rental proceeds to be used to offset the subsequent house payment. The investors must qualify on their own without the benefit of rental income and document they can carry the new payment as if the property were vacant. Only after an investor can prove a history of being a landlord, evidenced in Schedule E of federal tax returns, will a lender allow rental income to contribute to overall qualifying income.

The lender will count the principal and interest payment on the loan, and one-twelfth of the annual property tax bill and homeowner’s insurance premium. If the principal and interest payment is $1,500, monthly taxes are $150 and insurance $75, the mortgage payment used for qualifying is then $1,725.

If the property is the very first financed rental, the borrowers must be able to qualify with the additional $1,725 monthly payment, which can sometimes prove to be a high hurdle. However, once past the first one, the rest are easy and that’ why real estate investors really can’t stop at just one investment home.