The FLAW with BRRRR -- The 3rd 'R' - Refinance

[David Lamb]

I'm sure there is a creative workaround but the trouble I am finding with BRRRR model is the Refinancing part!! More specifically, I can't seem to refinance due to my Debt to Income ratio due in large part to BRRRR!!!!!

Facts: My net worth is about $3m. My income is about $350k. I own a car ($850 mos. payment). I have no credit card debt. I have no other debt. The only real "debt" I have is my investment properties which earn me about $75k cash flow (included within my $350k annual). Here's the problem. Due to the "magic" of real estate (i.e. depreciation, expenses etc.), on paper my properties are functioning at a loss (great for taxes, terrible for DTI). Of course with great losses, the debt side of the ledger greatly increases and substantially decreases the income side. Thus, despite two of my properties having over $1m in equity each, I can't seem to refinance to access the money for new investments due to DTI. Oh and my interest rates are 3.5 and 4.25 on the two properties, so the numbers would have to make sense.

HELOC - No. No HELOCs on investment properties I am constantly told.

CASH OUT - No. DTI

TRADITIONAL - No. DTI.

Soooooooo, why am I struggling with the third 'R' of BRRRR?

Thank you,

Dave