Thinking of buying a 2nd home for rental income

[xodus8]

I'm posting this for my brother in law.

Him and his wife make close to 200k a year, they currently save about 4.5k a month, and have about 80k in savings account. They have a house with a mortgage in Brooklyn. They are thinking of buying another house preferably two family and rent out the entire thing. How hard is it to get approved for a mortgage on 2nd property? Is the interest and property taxes deductible? Would it be difficult to hide some of the rental income? Who pays for the heat and water bill?

[David Smith]

I would think that a second mortgage would be easier, being as they have an established history and equity now.

[EJB]

I'm posting this for my brother in law.

Him and his wife make close to 200k a year, they currently save about 4.5k a month

Wow, good for them! They should teach us their tips. Do they not have kids?

[pixi]

I'm posting this for my brother in law.

Him and his wife make close to 200k a year, they currently save about 4.5k a month, and have about 80k in savings account. They have a house with a mortgage in Brooklyn. They are thinking of buying another house preferably two family and rent out the entire thing. How hard is it to get approved for a mortgage on 2nd property? Is the interest and property taxes deductible? Would it be difficult to hide some of the rental income? Who pays for the heat and water bill?

he shouldn't have any problems taking out a second mortgage if the income from that property  will cover the the mortgage

[yakrot]

Lkwd HUD scams?

[xodus8]

2 kids so far. a lot of help from parents/in laws in terms of babysitting in the beginning. He has a company car so that's a big savings. Anyone know of the tax implications on something like this? 

[yelped]

Property tax and interest is deductible. So is depreciation. The value of the house over 27 years. You can end up with a net deduction, especially the first few years when the interest is most of the monthly payments. You can also deduct various expenses associated with the house. Up to $25,000 loss if you make less than 105K. It get less as you go up. Talk to a professional.

[ckmk47]

mortgage:  The bank cares about monthly income vs monthly financial obligation.
So, $16,000/ month  or so income.   35% of that can go toward his own mortgage. But the total monthly debt payments shouldn't go above 43% ( car, utilities, 2nd mortgage..)
What is his own monthly mortgage payment?

[yelped]

Also, almost all banks will require at least 25% down-payment on an investment and rates are slightly higher.

[xodus8]

the mortgage now without property taxes and insurance is 1860$ a month (3.5% 30 year rate). At 25% down that would be hard to do, he currently only has about 100k and will need to borrow the rest to get enough for the downpayment. What kind of rates is he looking at credit score in the low 800s. Also the house he wants to purchase is 590k so 120k for downpayment wouldn't suffice? More for the accountants here, does the rental income have to be reported, can only part of it be reported?

[Palm5]

the mortgage now without property taxes and insurance is 1860$ a month (3.5% 30 year rate). At 25% down that would be hard to do, he currently only has about 100k and will need to borrow the rest to get enough for the downpayment. What kind of rates is he looking at credit score in the low 800s. Also the house he wants to purchase is 590k so 120k for downpayment wouldn't suffice? More for the accountants here, does the rental income have to be reported, can only part of it be reported?

$1860 a month mortgage in Brooklyn? Must've gotten a lot of help other than just babysitting

[Aaaron]

the mortgage now without property taxes and insurance is 1860$ a month (3.5% 30 year rate). At 25% down that would be hard to do, he currently only has about 100k and will need to borrow the rest to get enough for the downpayment. What kind of rates is he looking at credit score in the low 800s. Also the house he wants to purchase is 590k so 120k for downpayment wouldn't suffice? More for the accountants here, does the rental income have to be reported, can only part of it be reported?

All.

And yes, most mortgage companies will want 25% down on a second property.  And keep in mind borrowing for the DP will require a gift letter.

[ckmk47]

I would like to add that I think this is a very good idea.  If the numbers work, the expenses should be covered by the rent.  Eventually, the rent exceeds the expenses, and the house generates income.  The rise in the value of the property is a long term investment.

[xodus8]

currently the house they have the house and mortgage is only on his name. My sister works as well and her income is around 85-90k. Would it be possible just do everything in her name? Like this the bank would treat it as a primary home correct?

[dealfinder85]

currently the house they have the house and mortgage is only on his name. My sister works as well and her income is around 85-90k. Would it be possible just do everything in her name? Like this the bank would treat it as a primary home correct?

i once spoke to a lender who asked if i was putting my wife on the mortgage. he said better not to, if you can get approved, because may as well leave her credit open. I then spoke to another lender who said any other potential lender in the future would count that mortage against her.
so YMMV

[Aaaron]

I would like to add that I think this is a very good idea.  If the numbers work, the expenses should be covered by the rent.  Eventually, the rent exceeds the expenses, and the house generates income.  The rise in the value of the property is a long term investment.

You're making a bunch of huge assumptions.

1.  You get good tenants.
2.  No major repairs are needed.
3.  The value will increase.
4.  The value will increase at a higher rate than inflation.
5.  The area is a good rental market.