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What is a debt-to-income ratio and how does it affect mortgage lending when buying a rental home?

How To Master Your Debt-to-Income Ratio: A Guide for Rental Homeowners

When you’re looking at home financing, you’ll need to get acquainted with a figure known as your debt-to-income ratio (DTI). Before your eyes glaze over, it’s not too hard to calculate. 

What is a debt-to-income ratio and why does it matter? Mortgage lenders look at how much you earn every month and work out what percentage of that is attached to debt repayments. DTI won’t calculate your borrowing limit, but it helps assess your capacity to service a mortgage i.e. more debt. 

If your debt ratio is too high, it means you don’t have a lot of spare cash to make repayments. Or for a rental home, that you may not have enough cash flow to cover your expenses. 

In this article, we’ll cover how to calculate your debt-to-income ratio and how to lower it to secure an investment property for the rental market. 

A debt-to-income ratio is all monthly debt repayments divided by your gross monthly income. It’s used to determine your ability to manage mortgage repayments.

A debt-to-income ratio below 36% makes it easier to get approval for a mortgage. 

A debt-to-income ratio above 43-50% suggests that your debt is too high for the amount of income earned. 



Increasing your income or paying down small high interest debt such as car loans and credit cards can improve your DTI. 

There are ways to prove potential income for a rental home to be included in your DTI calculation, but this will depend on your lender. 

A debt-to-income ratio (or DTI) is calculated by adding up monthly debt payments and dividing them by your monthly income (before tax) to work out the percentage of debt vs income. 

When applying for a mortgage, lenders look at your income vs how much of it is attached two categories of financial obligations:

The dollar amount of ongoing household expenses such as mortgage payments, property taxes, insurance, HOA fees etc. 

The dollar amount of regular debt repayments such as credit cards or car loan, plus any other financial obligations you may have like student loans, child support or alimony payments.

This means a DTI only calculates debt and the fixed cost of ongoing financial arrangements. It doesn’t account for your household spending such as groceries or school fees. 

Example of a debt-to-income ratio calculation

If you had a salary of $75,000 per year, you would earn approx. $6,250.40 per month. Let’s say your household expenses total $1,500 per month and paying off a credit card and student loan costs you $350 per month. 

Debt-to-income calculation: 1,850/6250.40 = 0.295

If you were earning rental income from your property, you would add this to your gross monthly income. If you paid down a student loan or canceled a credit card, this would come off your back-end DTI. 

Learn More: Need help with a rental home? Discover Belong PRO, the best alternative to Property Management in Seattle, Redmond, Oakland, and many more cities across California, Florida and Washington State.

What is a good debt-to-income ratio for a rental property?

If you want to buy an investment property for the rental market, you’ll need a favorable debt-to-income ratio. A ‘good’ DTI vs ‘bad’ DTI depends on many factors, including:

Most lenders prefer a debt-to-income ratio of 36% or less. Others may accept up to 50%, depending on the above factors. 

If you’re buying a home for the sole purpose of having a long-term rental, the potential to add rental income to your gross income may also come into play. Again, whether this will be considered as part of your DTI depends on the lender you’re working with. But there are ways to make this process easier.

If the home you intend to buy is already a rental home, try to get a copy of the existing lease agreement or rental history. Some lenders will apply 75% of the lease agreement as rental income to your total gross monthly income as a projection. 

If the home has never been rented before, or you are buying it vacant, some lenders will use the home’s appraised value to calculate the 75% as gross monthly income. It’s worth having this discussion with your chosen lender to look at your options. 

Don’t forget that you will also have to account for the home's operating expenses such as the mortgage, property taxes, insurance premiums and any HOA fees. 

How can I lower my debt-to-income ratio to buy a rental home?

Having a high debt-to-income ratio can affect you in a few ways. It will make it harder for you to make repayments and also work against you when it comes to finding a low interest rate with your preferred lender. While some lenders accept higher DTIs, they may also charge more for these loans. 

If your current DTI is too high to apply for an investment property, here are four ways to reduce your debt-to-income ratio:

The down payment will affect your ongoing mortgage repayments, so if your DTI is too high, it could pay to wait until you have a larger deposit. Draw up a household budget and look at where you could cut expenses to focus more cash on your down payment. Don’t refocus any of the money you make on repaying credit, because you want your debt to lower too. 

Instead of adding to your downpayment, you could also focus on reducing your high interest debts such as credit cards and loans. Smaller loans such as car loans or credit cards often have higher interest rates and repayments than student loans. Paying these will lower your back-end DTI and improve your ratio. You could also look at consolidating your debt or lowering your credit card interest by shopping around for a better deal. 

While you’re in the market for a mortgage, avoid the temptation of signing up for another credit card or adding any new debt if you’re consolidating loans. Even if you can afford the repayments or there’s an irresistible sign up deal, the amount can count against. Most lenders will consider the amount you’re approved for as a potential liability. 



Are there any ways you can add to your gross monthly income? Whether it’s asking for a pay rise or taking up a side hustle, any regular income can improve your DTI. If you already own a rental property, you consider ways to increase the value of the home and charge higher rates to improve your cash flow. 

Learn more: Belong helps homeowners optimize their rental income and financial security. See why thousands of US homeowners are ditching outdated Property Management in San Francisco, San Diego, Los Angeles, Tampa, Jacksonville, Concord, Berkeley, Orlando and more.

What is a debt-to-income ratio and how does it affect mortgage lending for buying a rental home? Find out how and why to calculate and reduce your DTI ratio

Financial Security for Rental Homeowners

Tech-Enabled Property Management is here, but is it really innovative? Discover 5 ways tech is shaping property management and why Belong's innovation is unique

5 Ways Tech is Transforming the Rental Experience and Property Management

When it comes to innovation, property management is not what you would call ‘ahead of the curve’. When our lives and work began to shift online, so did rental listings. And that was the beginning and end of technological advancements for years.

It was taking what already existed and putting it on a browser or app. Nothing was addressing the issues that have been plaguing homeowners and their residents for years. 

But after lagging behind, technology is finally finding its place to revolutionize how rental homes are managed. Because the real opportunity that modern tech presents is the chance to completely rewrite the rental experience. 

That’s exactly what Belong is doing. We’re not just bringing you tech-enabled property management. The mission of Belong is to create authentic belonging experiences, empowering residents to become homeowners and homeowners to become financially free. 

To explain how that works, let’s take a look at five ways the property management industry is innovating through technology. And how Belong is taking that further to create better experiences for both homeowners and their residents. 

Apps for rent collection are handy — guaranteed rent in your pocket every month is better



Tenant communication apps aren’t more effective than a phone call unless someone can respond 24/7



Access to more data and analytics is making pricing rental homes more effective



Video can extend the reach of your online listing to attract more applications 

5 ways technology is changing property management

In 2023, there’s no shortage of apps for rent collection. These apps charge either a subscription or transaction fee, but simplify the process of collecting rent. 

For homeowners, rent collection apps make it easier to track payments and document income for tax purposes. 

For residents, rent collection apps offer more options and flexibility. Some will also report on-time payments to credit reporting agencies to help build a credit rating (though many charge more for this).

How Belong is rewriting the rent collection experience:

Belong’s app is super convenient for rent collection, but it’s so much more than that. Belong will also guarantee rent for homeowners, giving you predictable income that is paid like clockwork. Residents can choose the payment frequency that works best for them, without disrupting your cash flow. 

Not only will Belong report on-time payments to credit reporting agencies for residents, we offer extra perks too. Residents will soon be able to earn rewards and even build credit towards their first home deposit, simply by paying rent on time. 

For homeowners, we make cash flow management easier with the option to advance your income or split unexpected costs (such as repairs or emergency maintenance) over the term of your lease. It’s your income, paid on your terms. 

Discover Belong PRO: See why thousands of US homeowners are ditching outdated Property Management in San Francisco, San Diego, Los Angeles, Tampa, Jacksonville, Concord, Berkeley, Orlando and more.

What marvelous innovation has technology brought to property management to connect with tenants? Well, thanks to the introduction of ‘tenant portals’, most residents can log their maintenance issues online or in an app now. This makes it easier to find a history of communication, but it doesn’t mean that issues will be resolved any faster. These apps and portals are designed to notify property managers of an issue, which they will get during business hours. 24/7 communication is reserved for emergencies only, if available at all. 

Some larger companies are looking at things like AI and chatbots to answer common questions quickly. But unless ChatGPT learns how to arrange a contractor to fix that weekend plumbing emergency, its usefulness will be limited. 

How Belong is rewriting the tenant communication experience:

Belong has a dedicated concierge service, available 24 hours a day, 7 days a week on the Belong app. Not chatbots, no leaving a message after the beep. Real people are available to speak to both homeowners and their residents, which means that you can manage your home during the hours that suit you. If residents have a question after work, they can get a fast and personalized response. 

Traditionally, property managers won’t speak to tenants after hours which makes communication frustrating and inconvenient. By attending to resident needs quickly, Belong has a proud history of happier residents and longer tenancies. More than 73% of Belong residents renew their 1-year lease, minimizing disruption to cash flow for our homeowners. 

Learn More: Discover Belong PRO, the best alternative to Property Management in Seattle, Redmond, Oakland, and many more cities across California, Florida and Washington State.

3. Online dispute resolution for lease violations

When someone violates their lease or stops paying rent, the process goes to the courts. This can be a lengthy and costly process for homeowners. While evicting someone is never a nice experience, technology is improving how it’s managed. 

The state of California for example has the Online Dispute Resolution (ODR) process, which is an alternative to having to go to court. This service can provide online guided negotiation and mediation. If an agreement is reached, all necessary forms can be submitted online, avoiding a trial.  

How Belong is providing better eviction support:

The best way to avoid eviction is finding the right tenants. This is why Belong goes the extra mile to find people who will love your home like you do. We start by integrating with the best online listings to attract more applications. Then we use a clever mix of human and digital vetting tools to find people who will love your home long-term.

We also know that so-called “eviction protection” packages in the property management industry are another way to hide fees. You pay more for property management services with eviction help included, only to find out that you’re covered for basic filing fees only.

If you choose to partner with Belong PRO, you’ll have real peace of mind that your eviction process is supported. If Belong ever needs to evict a resident that we have chosen (not existing leases or tenants), Belong will cover legal costs up to $15,000. 

Learn More: How to manage the eviction process in California, Washington state, and Florida. 

With everything moving online, it’s become a lot easier to price rent for a home. With access to better data and more resources, researching comps in your local area is faster than it used to be. With a few clicks you can find past and present listings — even look inside neighboring rentals to get an idea of what people are paying. 

How Belong is optimizing rental price based on real demand:

Comps only tell part of the story. Listings only tell you what a homeowner is hoping to get for their home — not what people are actually paying. 

Belong doesn’t rely on comps alone to price homes on our Belong PRO network. We use clever algorithms and real-time demand to find the right price based on what your home offers, the amenities people want, the season, and how many people are active in your market. 

Read More: How to price a rental home in LA, San Diego, San Francisco and Miami. 

Discover The High-Tech (But Human) Property Management Alternative

The landlord-tenant relationship doesn't need to be frosty, with these 6 simple tips for landlords to improve tenant communication and make them feel at home.

Good Tenant-Landlord Relationships: 6 Tips for Self-Managing Homeowners

Historically, tenants and landlords have a frosty relationship. So frosty that Belong prefers not to use the terms at all (we like the friendlier ‘homeowners and residents’) as we rewrite the rental experience. 

But it’s not always this way. Renting out a home provides an incredibly vital service to the community and just as there are great long-term residents, there are also fantastic and helpful homeowners. You may really enjoy renting out your home and look at rental management as a hobby or profitable side hustle. 

So for those who are going it alone and self-managing a rental home, what can you do to improve your landlord-tenant relationship? To keep your home (and cash flow!) running smoothly and encourage great residents to stick around long term?

Here are 6 easy tips that can make your tenants feel more at home (and less likely to leave at the end of their lease). 

1. Create a welcome pack for new residents

When self-managing a rental home, it’s a great idea to send a welcome pack for your home with the signed lease. After all, you want them to treat it as their own and feel comfortable in their new space. Think of it like a compendium that a hotel room has, helping you get up to speed with standard procedures and the local area. 

A welcome pack can include any information that new residents should be aware of. This could include: 

You could even include some helpful personal touches, like school districts and the best coffee shops or dog parks in your neighborhood. 

Learn More: Discover Belong PRO, the best alternative to Property Management in Seattle, Redmond, Oakland, and many more cities across California, Florida and Washington State.  

2. Remove the need to chase them for rent

One of the most uncomfortable conversations between landlords and tenants is about overdue rent. Asking for rent doesn’t make you the bad guy, but it can still feel unpleasant when rent goes unpaid or tenants are struggling financially. Soon your tenants may start dodging your calls and before you know it, the relationship has soured despite best intentions. Or worse, you need to start eviction proceedings. 

This is why guaranteed rent is Belong’s most popular product. It’s proven and beloved by over 2,000 Belong PRO homeowners who now get paid passive income like clockwork, regardless of when their residents pay rent. 

Read More: How Guaranteed Rent is Changing Property Management Forever

Showing your home some love is a great way to make sure your tenants do too. Be sure to create a budget for regular home maintenance to ensure you can attend to resident concerns and home repairs as soon as they arise. 

It’s also a good idea to invest in functional features of your home that can approve the home’s appreciation long-term while also making the house more comfortable to live in. So if a resident complains about a moldy shower curtain, you should consider investing in a screen that can be cleaned, rather than replacing it with another cheap shower curtain. If the garden is dying, look at installing a reticulation system to keep it watered all year round. 

Read More: Why Ignoring Rental Home Maintenance Could Cost You More Than Repairs

Great communication with tenants is essential to a good relationship. That means not springing inspections on them at a moment's notice, respecting privacy, and keeping communication civil.

The best advice is to be professional with all communication, but it’s also ok to be friendly too. Ideally you want to achieve a relationship where you are approachable. It’s better that a resident can come to you with concerns, such as if rent may be late or something needs repairs, than letting it get to a point where you need to evict them. While we don’t suggest you start bombarding them with emojis or ‘HEY GURL!” intros, it is ok to be friendly and, well, human when you email them!  

Learn More: Belong PRO can handle all communications with 24/7 concierge services available for both you and your residents. See why thousands of US homeowners are ditching outdated Property Management in San Francisco, San Diego, Los Angeles, Tampa, Jacksonville, Concord, Berkeley, Orlando and more.

Artwork is a great way to personalize a space, helping your tenants to fall in love with your home. But as the homeowner, you don’t want to be dealing with lots of damage when the pictures come off. As part of your welcome pack or communication, you could suggest some no-damage solutions like the ones in this article for hanging art in a rental property. 

And if your tenants ask to paint a room or two? Work with them on a color scheme and cost that you can both be happy with. This could improve the ROI of your rental home, while also helping residents to make themselves at home. 

Another way to keep your residents comfortable in your home (and getting the bills paid on time) is to look at the sustainability and efficiency of the house. If your rental home is uncomfortably cold all winter and stuffy all summer, there’s a good chance your home has a high carbon footprint and isn’t appealing to stay long-term. 

Thankfully there are plenty of cost-effective ways that you can make your rental home more sustainable, making a great impression on your residents and reducing their emissions. 

Read More: 7 Cost-Effective Ways To Make Your Rental Home Sustainable in 2023

Belong is simplifying the rental experience across the US and helping more homeowners reach their financial goals on their own terms. For people who want a completely hassle-free home management experience with guaranteed rent and 24/7 concierge service, check out Belong PRO.

If you're looking to improve your landlord-tenant relationships, check out 6 easy tips to make your tenants feel more at home and want to renew their lease.

Discover 6 of our top picks for cost effective ways to improve your long-term rental ROI when getting your rental home ready for listing on the market.

6 Ways to Improve Your Rental Listing Price and ROI with Belong

What’s going to get you the best possible listing price and return on investment for your rental home? Livability. 

Sure, nice design and first impressions count when it comes to getting your home loved and lived in quickly. But it’s the practical upgrades that will improve your ROI long-term. If you want your residents to love your home as much as you do, making the home as comfortable as possible is key. 

Belong has worked with over 2,000 homeowners (and counting) to make sure they meet a high standard of safety and livability that reduces vacancy, increases rental values, and attracts dependable, long-term residents who want to call your place home.

In this article, we’ll take a look at six of Belong’s top picks for cost effective ways to improve your long-term rental ROI when getting your rental home ready for listing. 

There’s nothing more frustrating than a home that looks great but doesn’t function well. If something in your home isn’t working, it’s going to bother you every day. It’s a sure-fire way to make sure your residents will want to leave when the lease is up. 

Of course, functional doesn’t scream value add. Making sure the plumbing is working won’t yield you a higher rental rate. This is where you need to look beyond the bare-minimum of “not broken” and consider how a functionality upgrade might make your home a more desirable place to live. 

Let’s use the bathroom shower as an example. Is there anything better than a good hot shower at the end of a long day? This is one area that homeowners often value the most in their personal space, but neglect in rental homes. If your rental home has a leaky shower head that falls off its hinge all the time, it will drive your residents crazy. 

You could fix the leak to make it functional. Or, to boost the value of your home to your new residents, you could replace it with a more modern fixture with good water pressure and flow. This will help elevate the bathroom aesthetics, while giving your residents a great experience every day. Not to mention avoiding the repeated repair requests. 

If you partner with Belong PRO, we’ll suggest some functional upgrades that will improve the resident experience and can attract a premium rental price for your home on our network. 

Read More: How Belong Inspections Reduce Vacancy and Prepare Your Home For New Residents

People rent homes because they have a practical need for somewhere to live. But a decision to spend more is often more emotional. A home that feels light and bright has the power to lift your mood. They look great in photos and feel good to walk through during tours. 

When new homeowners join Belong, we often recommend giving their rental homes a fresh coat of paint in a neutral color. Not only does it make the home appear bigger and brighter, it’s a simple and cost-effective way to make a rental home look updated. 

Upgrading old and outdated light fixtures is another great way to create a nice light ambiance in the home. A well-lit home is inviting and shows you have nothing to hide! 

You can even create the illusion of more square footage with light tricks. Ditch heavy drapes in favor of shutters or blinds that let more light in. Install a mirror or two to increase the visual size of rooms. 

Keeping a strong return on investment also means protecting yourself against costly problems such as structural damage, safety hazards, and legal liability. 

Rental homes in the US have what’s known as an ‘implied warranty of habitability’. If your house becomes unsafe or unliveable and you don’t take action, your residents may have a legal right to stop paying rent, move out without notice, or even sue you. 

Indoor air quality problems such as mold, radon, and lead

Security to minimize the risk of crime against residents in your home

If you partner with Belong PRO, we’ll give your rental home a full safety inspection. This will get you off to a good start with your new residents and save you costly headaches down the road when things left unchecked would start to break down. We even offer rental home insurance to protect against unexpected damage. 

No one is going to pay top dollar for a home that isn’t clean. Just as a great first impression can lift a home’s appeal, things like dirty carpets, scratched up flooring and heavy scuff marks on the wall can work against you. A professional clean might not increase the price of your listing, but it won’t detract from it like listing an unclean home could. 

Belong also recommends having a no-smoking policy in your rental home. This will protect the rental value of your home by avoiding the staining and smell of nicotine that seeps into the paint work of houses. 

A clever way to increase the value of your rental home long-term is to reduce the running costs and carbon footprint for your future residents. Energy-efficient homes cost less to run which makes them more attractive to applicants — reducing vacancies and attracting more rent than a non-efficient home. 

Sustainability is increasingly important to Millennial and Gen Z renters, with research already suggesting that 61% of renters would pay more each month in rent for an eco-friendly apartment. Single-family homes cost more to run than apartment rentals and we anticipate that in future, more sustainable rental homes will have the upper-hand on competing homes in their neighborhood. 

The weeds popping up through the cracks in your driveway may not bother you, but this can be a signal to potential renters that your home hasn’t been occupied or cared for in a while. Before listing your home, give the yard a tidy up. You should make a plan for keeping it that way. The outside of homes need regular maintenance to keep them in top shape — things like mowing lawns and clearing gutters. Decide if this is something you want to include in your rental as a service, or if residents need to take responsibility for it, so details can be included in the lease. 

Belong is not a traditional property management company. We do things differently to help people achieve financial freedom through real estate, on their own terms. 

With Belong PRO, we’ll partner with you to get your home the best price, guarantee your rent, and care for it the way you would. Never worry about bad residents, late rent, cost blowouts, or 2am phone calls ever again. 

Visit our homeowner's page to find out more about how our services are helping people to ditch Seattle Property Management, Redmond Property Management, Oakland Property Management, and more.

Melanie Kershaw

Mel Kershaw is a Content Lead at Belong. With an extensive background working with technology companies including Eventbrite and Yelp, she’s always looking for ways to create educational and informative articles that simplifies tech and solves problems for her audience.

Natalie McNeal

Belong

Jordan Newsom

Ashleigh Graf

Annalise Mantz

Natalie McNeal

Belong

Jordan Newsom

Ashleigh Graf

Annalise Mantz