How much rental income will a lender actually count?
Less than your rent. Usually a lot less, and sometimes a negative number.
The mistake almost everyone makes is treating rent as income. You collect $3,000 a month, so that's $3,000 of income on the application. It isn't. A lender takes the rent, subtracts the entire house payment on that property, and counts what's left. If the payment is $2,700, your rental income is $300 a month, not $3,000. If the payment is $3,200, you don't have rental income at all. You have a $200 monthly loss working against you.
This calculator runs the actual math. Answer two questions per property, enter the figures it asks for, and it tells you the monthly number a lender would use.
Why isn't my rent counted dollar for dollar?
Because the rent isn't yours to keep. The mortgage, taxes, insurance, and HOA dues on that property come out first, and the lender knows that, so it nets them out before counting anything as income.
There's a second reason, and it's the one that surprises people who've owned rentals for years. For a property you already own, the lender doesn't start from your lease. It starts from Schedule E of your tax return. Whatever you reported to the IRS is the starting point. If you wrote expenses down aggressively, which most landlords do and should, the income the lender can count goes down with it. The lease on your wall says $3,000. Your tax return might say something very different, and the tax return is what gets used.
Some of those write-offs come back. Depreciation isn't real cash leaving your pocket, so it gets added back in. So do a few other paper expenses. That's why a property showing a loss on your return can still produce usable income once the calculation is done properly, and it's the single most common reason a landlord gets told "no" by a lender who didn't do the add-backs.
How does the two-year calculation work?
For a property you already own, the calculator looks at two tax years instead of one.
It combines both years and divides by the total number of months the property was actually rented across those two years. Not by 24, and not by 12. If the property sat empty for three months while you turned it over, those months aren't in the denominator, which keeps a vacancy from permanently dragging your average down.
Then there's a rule that protects the lender rather than you. If your monthly income in the most recent year came out lower than the prior year, only the most recent year is used. You don't get to average a strong year with a weak one and show the middle. A declining rental gets judged on where it is now. This matters if you had a rent reduction, a bad tenant, a long vacancy, or a major repair year, because it means last year's numbers carry all the weight.
What if the property wasn't rented the whole year?
Enter the months it was rented and the calculator handles it. The months-rented figure is the denominator, so a property rented eight months out of twelve is evaluated on eight months of performance, not penalized as if it were a twelve-month failure.
What you can't do is leave the vacancy out entirely and enter twelve months. The tax return tells the same story, and the gap is one of the first things an underwriter looks at.
What if I'm buying the rental, not refinancing one I own?
Different path, and a simpler one. There's no tax return yet, so there's nothing to average.
The lender uses the lease you've signed or the market rent from the appraisal, and counts 75% of it. The missing 25% isn't a penalty, it's the lender's built-in allowance for vacancy and maintenance, because no rental collects twelve months of rent twelve months a year forever. Then the full payment on the new property comes out of that 75%, same as always.
So on a $3,000 projected rent, the lender starts from $2,250, not $3,000, and subtracts the new payment from there. Run that number before you write the offer. It's the difference between a deal that qualifies and one that doesn't, and it's not a number most buyers have in their head.
Why does this matter before you make an offer?
Because the gap between what you think a rental contributes and what it actually contributes is where investment-property deals die.
Buyers run the numbers on a rental assuming the rent covers the payment and the surplus is income. The lender runs them assuming 75% of the rent covers the payment and only the remainder is income, and if there is no remainder, the shortfall gets added to your debt load and shrinks what you qualify for on everything else. People find this out after they're in escrow, when the loan comes back smaller than the purchase they already committed to.
Running it first costs you five minutes. Running it late costs you the deposit.
What this calculator doesn't do
It gives you the income figure, not an approval. It doesn't check your credit, it doesn't calculate your full debt-to-income ratio across every other obligation you carry, and it doesn't account for the program-specific overlays some lenders add on top of agency rules.
It also uses what you enter. If your Schedule E figures are estimates, so is the result.
Final numbers are set by underwriting. What this does is get you close enough, early enough, to make a decision with. If you want the real one, send me the two tax returns and the lease and I'll run it.
