BRRRR - the refi and repeat is stumping me

[Steve Holly]

Hi all, trying to wrap my mind around BRRRR. It all seems straightforward enough - Buy, Rehab, Rent, Refi, Repeat... the part I'm having a hard time with is the refi and repeat. Since banks use debt-to-income to qualify/approve you for a loan, how do you get around the "debt" part, since income isn't yet established? Perhaps I'm overthinking this, but I would be a real bummer to close on a deal, and not be able to refi and repeat. Thanks all!

[Alexander Felice]

when you're doing a BRRRR on a SFR it's going to go by your personal income.

Basically your T/R average income, minus your credit report debt service. 

As you accumulate positive cash flow on your schedule E (not your projections) they will ADD to your DTI not subtract. So if you're buying good BRRRR's you should be able to go faster, not slower. You will need more in reserves as you grow though (usually 6 mos PITI for each unit)

also, always talk to your lender FIRST before you close on everything. This is the number one hurdle that people tell me they run into. They get stuck at refi. Talk to a lender and build your exit strategy from the start.