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?

[Carini Rochester]

As the debt-to-income problem looms (after a few purchases, you could move to multi-family investing, mixed-use investing, or commercial property purchase. Pursue commercial lending for these. The commercial lender will be more concerned about the property's ability to cover the mortgage payment (they look at it more like a business) than they look at the debt-to-income ratio.