Thread: Calculating debt/income for rentals?

Hello,

Sorry if this has been answered, look around but didn't see anything.

When one is looking at rentals, how do they go about figuring out to accept or not? I have read that the general rule for a house is 33% of your pretax income. So say you make $3000/month, and your house payment is $1000. Are you not eligible for buying rentals? Do they have different standards?

Here is my unique story.

I currently own a house with a total payment of $822 a month, but got transferred away so I am now renting the house at $600, taking a loss. I currently rent in the city I live in, but don't plan on staying here. Don't know the city, not many investment opportunities, and can't afford the possibilities anyway. Don't know where I will end up, either back in the original city or about five hours away from that city.

I am tired of my loss (obviously) and what to do something about it. My choices are either refinance with more money down to lower payments, or buy a positive flow property. I know the old city extremely well, and there are some great opportunities in terms of duplexes. What I am considering is grabbing a duplex, using a management company (and family/friends) to help take care while I am away. Eventually selling the original property (when I am not underwater) and using the duplex income to instead cover upcoming school payments.

Say I made $5,000 a month, not including the rent. Would they say (5000+600)*.33, or $1850/month allowable. Then take out the $822 I already have eaten up, leaving me able to get accepted for $1025 a month? What do they do with the rent I am paying to live, do they take they out as well?

Thanks for any help, don't know anyone who is into rentals!