FAQ: How is Net Rental Cash Flow (Non-Subject Property) Calculated?

Q: What is non-subject property net rental cash flow, and how does Charlie calculate it?

A: Non-subject property net rental cash flow refers to the rental income calculation for properties that are not the primary property securing the loan (non-subject properties). This ensures rental income from other properties is properly factored into the borrower's overall income and liabilities.

Charlie uses a set of rules to determine net rental cash flow based on the property's current usage type, proposed usage type, rental income status, and documentation provided.

Calculation Logic for Non-Subject Properties:

1. No Rental Income or Unknown Rental Income:

• Net rental cash flow = NULL (blank)

• Charlie skips the rest of the calculation for that property.

2. For Primary Residence Non-Subject Properties

If:

• Current usage type = Primary

• Proposed usage type = Primary or "--" (no change)

• Rental income = Yes

• Subject property indicator = No or blank

Calculation:

Net rental cash flow = Gross rent × Occupancy rate × Ownership %

Note:
If occupancy rate or ownership % is blank, Charlie still runs the calculation (blank is not treated as zero).

Special Note:
This rental income is always included in total income but is not added to total non-subject net rental income.

3. For Second Homes or Investment Properties (Proposed Usage Type = Primary):

If:

• Current usage type = Second home or investment

• Proposed usage type = Primary

• Rental income = Yes

• Subject property indicator = No or blank

Calculation:

Net rental cash flow = Gross rent × Occupancy rate × Ownership %

Note:
This rental income is added to total income but excluded from non-subject net rental totals.

4. For Second Homes or Investment Properties (Proposed Usage Type ≠ Primary):

If:

• Current usage type = Second home or investment

• Proposed usage type ≠ Primary

• Rental income = Yes

• Subject property indicator = No or blank

• Documentation type = Tax return, lease agreement, or market rent

Calculation:

Net rental cash flow = Gross rent × Occupancy rate × Ownership % – Monthly mortgage (non-subject) – TIA (taxes, insurance, association dues for non-subject property)

Note:
If occupancy rate or ownership % is blank, Charlie still runs the calculation.

Q: What happens if I enter a gross rent amount?

For all non-subject properties:

• When a gross rent amount is entered, Charlie uses the calculated net rental cash flow in the liabilities calculation.

• This ensures the individual mortgage liabilities for that property are not double-counted.