Noob Questions about BRRR

[John Crisp]

Noob investor wanting to learn everything about BRRR. I have 10k cash and 25k HELOC on home "A" and am researching the best way to get into REI. I recently talked to another investor that recommended I take the 25k HELOC and put 5% down on house "B" that I then move into. I then should rent house "A" while living in house "B" for 6-12 months. Then refi house "B" put 5% down on another home (house "C") that I would move into then. Ultimately, he said I could continue in this process to acquire 3-5 doors and then should have enough to be able to start putting down 25% on each investment property and not have to move from home to home.

I am new to all of this. As I said I am looking for the best way to break in to REI. Here are my questions about this:

1. This sounds like a version of BRRR. Do you agree that this is a viable way to get in for someone that doesn't have a lot in cash or assets?

2. How is my debt to income ratio affected/managed during all this? Do my renters count as income so that it washes in terms of debt to income ratio enabling me to continue to get additional mortgages? 

3. What should I be watching out for/ concerned about while taking this approach?

[Nicholas L.]

@John Crisp it's possible, but this doesn't sound like enough cash. If you had a major repair and a couple months of vacancy in one, all your cash would be gone. And in order to refinance and take cash out, you need to increase the ARV of the house, which typically means you'd be spending money on a rehab - and also need cash for that.

Rent is counted as income, but requirements vary by lender - some want 2 years of rental income shown on tax returns, or will only count 75% to account for expenses, etc.  It's specific to the amount you're trying to borrow, and from whom.