Buying my first rental after getting out of debt.

[Joshua W.]

I plan on being debt free except for the mortgage on my house within the next 18-24 months.  At that point I planned on spending 2 years saving up 50k for my first real estate investment property.  My goal is to find something in the 75-85k range, spend 15-20k fixing it up, and hopefully have it value at about 120k when all is said and done.  So my thought is I bring 50k to the table, and get a 50k investors loan for the property.  When all is said and done I get a mortgage ONLY for the value of the loan so I can pay it off, which means I should have a 50k mortgage on a 120k property.  With the renters and my own cash flow, I should be able to pay that house off in under 2 years so it's 100% gain on the rent, and then save up 50k to do the next deal.

So the reason I'm wanting to pay each house off before starting the next deal is I'm slightly worried about debt risk, plus being able to get a mortgage with little to no credit and my DTI limiting how much I can borrow. I'm in the Nashville market, so snatching up houses isn't the easiest thing, but I'm going to take it slow and steady so I don't make a huge mistake. My DTI with the house is 25%, so I guess I can go up another 9% with the mortgages on the rentals. Does that seem right? Or when you are doing rentals do banks not look at your DTI anymore? I'm really new at this, but being 35 now, I'm hoping that this will snowball quickly and starting 4 years from now, I should be able to get to the point where I'm buying and fully paying off a house every year until I don't want to manage any more properties, hopefully being able to quit my job by 45-50.

Feel free to poke holes in my plan, I can't shore it up until I know where the weaknesses are lol.  But the lending thing worries me a bit.