Reality check: is my property-acquisition plan sound?

[Tom Seigold]

After debts and household living costs, I have roughly $40k/year in disposable income to put toward down payments on new properties.  If all goes well, my hope is to average buying $200k worth of property every year (20% down), rent it, and repeat.  Once enough equity exists in a property, maybe every 5 years, either do a 1031 exchange or a cash-out refinance.

My finances:

Gross monthly income: approx. $12k, plus an annual bonus that averages to roughly $1k/month (if that can be factored in)
Current monthly debts (including mortgage, property tax, insurance, car, child support): approx. $3.5k

Debt-to-income concerns:

Time for some napkin math for a concern that makes me worry whether this goal is actually possible...

Assuming all goes as planned, I worry about eventually hitting a wall where I'm unable to qualify for new mortgages at a certain point due to how the investment properties' mortgages will affect my debt-to-income ratio.  I know underwriters want my debt-to-income ratio around 43% maximum (including the new mortgage) in order to approve a new mortgage.

From what I've read, it appears underwriters will consider a certain amount of rental income in my favor, but only 75% of rent minus expenses.  I'm not sure exactly which expenses they consider here (are estimations of repair costs part of that?), but I suppose that means I can only rely on, say, 60% of rent being counted as income.  With that 60% number, and a $200k property that rents for $2k/month, $1.2k gets added to my "income" consideration, while my "debt" consideration (mortgage + interest + insurance + taxes) goes up somewhere around $1k.

So, a change of $1.2k to gross monthly income and $1k to current monthly debt every year means I can qualify for a smaller and smaller mortgage every year, even when things go well.  I feel as though there's a point after a few years where I'll have enough money saved for a new down payment, but won't be able to continue acquiring new properties.  Is that a valid concern?  Is there something I'm not considering?