As with any investment, you must get a fair return on your investment. The more money you borrow, the greater your return on investment must be in order to repay the loan. When banks look at loans for investment properties, they look to the ability of the property to repay the loan. They look at the cash flow and net income the property will produce. Cash flow is the amount of money the property will generate.
Net income is the amount of money left after all expenses are paid.
Expenses include repairs and maintenance of the property, legal fees, accounting fees, taxes, insurance, and management. The bank will want to see net income equal to about 120 percent of the monthly mortgage payment. If the property is already rented, they will look at the actual rents. If not, they will look to the appraiser to indicate market rents. Appraisers evaluate income property by comparing the rents at similar nearby properties.