BRRRR with HELOC question

[Phil T.]

I'm in the process of getting a HELOC to use towards purchasing a rental. I plan on buying the rental with the money from the HELOC, then probably doing a BRRRR on it. Should I be concerned about doing the refinance portion of a deal like this? I'm not sure if a bank would count the money on my HELOC as "debt" and say that my debt to income ratio was too high to qualify for a refi since I wouldn't be able to show much rental income on the property yet. I might be overthinking it, but will someone let me know if I am? Thanks!

[Nicole A.]

And a thing to remember is that when a bank will refi 75% (or whatever) of the appraisal, it might not actually be 75% because there is also the debt service to consider. Basically, they want to see how much rent you're getting compared to the expected PITI of what your new mortgage will be...and they all use different formulas to decide how much money they'll cash out to you based on your rental income.

So it's not just as simple as giving you 75% of the appraised value of your property.