Assume we are speaking of rental properties. Assume the rental properties are free and clear. Assume the rental properties have tenants and they have rent paid since day one. 

I hear success stories about how people buy homes with cash, then refi to cash out, then the tenants rent pays the note and they can just move down the line buying homes....rinse and repeat, correct?  

But people are not talking about the back end banking that allows this to happen. Speaking about the above set of assumptions, let's say the owner of these rental properties has a blue collar job making 45k a year. He has a small amount of debt, no car note but a mortgage for his primary residence. When you have a average joe six pack type of job, your debt to income ratios are not in favor or additional borrowing power. 

My questions is if banks count into the lending scenarios the rental income when factoring in the applicants income. If rental income isn't allowed, then refi would not be allowed because DTi ratios would be outside the guidelines. But if the rental income is allowed banks would approve the applicant?!  

I'm just realizing that in order to buy homes and refi and cash out and buy more homes and keep it rolling down the line, one must need a substantial salary in another line of work to show that the note created with a cash out refi would be easily absorbed with the income the applicant earns without counting the income earned from rentals. 

Then how do people buy ten-twenty-thirty rental properties?  Do they wait the two year period to reflect the rental income on their tax returns and then use that modest rental income for lending purposes? Or are there such lenders that will lend on future rental income provided rent deposited monthly and lease agreements can be documented??