BRRRR Method: Problem with showing income for refinance

[David Stone]

Hey BP!!  We have a property we have rehabbed and are considering renting and pulling out equity to pay back our private loan and fund a new deal.  

We talked to a credit union about obtaining a line of credit on the property and were told that we could either take the tax benefit of showing a loss on paper (and have no documented income from the property which would not allow us to obtain a loan due to our debt-to-income ratio) or NOT show a loss on the property and count the rental income as actual income.

Has anyone run into this problem?  Is it true that you can not enjoy the tax benefits of a rental property if you plan on pulling out equity to fund future projects?

Thanks in advance!