BRRRR and Debt-to-Income

[Yeng Lacanlale]

I am new to the BRRRR concept. I get the process. However, doesn't these banks eventually see Income vs Debt after doing this over and over again. Specially with folks who do this at a very fast rate. Can someone please explain?

[Chris Mason]

Before you've owned it long enough to appear on tax returns, an investor friendly lender will just do [ rent * 75% - PITI ].

Once it appears on tax returns, if you need/want to exclude the one-time rehab expenses, put it on line 19 of schedule e with the comment "see statement X," and then statement X in extreme detail lists all the repair and rehab work you did, and furthermore you can provide me with every single receipt/invoice, exactly matching the line 19 number, exactly down to the penny (so, it's best just to make each invoice/receipt be a line-item on statement X... if Contractor John gives you 5 invoices throughout the project, show me 5 line-items).

Only one-time repairs/rehab can be discounted from the mortgage DTI math. The invoices/receipts should substantiate that. "Brand new replacement water heater expected to last no fewer than 10 years, $4000 & removal/disposal of old water heater, $1000" is clearly one-time. "Water heater, $5000" is perhaps NOT one-time, because who is to say your water heater doesn't need $5000 of work on an annual basis? Your contractor should be OK with putting that level of detail on your invoice.

Before anyone screams at me, you don't HAVE to do any of this if you just want to be in a gray area where maybe you can get a mortgage, maybe you can't, who is to say.