In the middle of my first BRRRR strategy and need advice!

[Caleb Waller]

Hi Bigger Pockets!

Please help an aspiring real estate investor analyze my current situation and options.

Here is the scoop:

My wife and I purchased a bank reo town home in 2015 for $255K with a 5% down conventional mortgage. At the time of purchase the house appraised for 275k (which I thought was a bit low but whatever...) This has been my primary residence for the past 2 years and during this time my wife and I repainted every single inch of the interior, fixed up the yard, and remodeled the kitchen among other small cosmetic fixes. 

The house just reappraised for 320k and I close on a cash out refinance tomorrow to pull all the money we have put in and our profit (30k in cash total) in hopes for renting this home out and purchasing another primary to repeat the process with.  

Our new 30 year fixed mortgage is $1695 a month and rents in our neighborhood range from $2,000 to $2,500 a month. We are hoping to do a few more improvements before renting to help our chances of commanding the highest possible rent. 

Here is where I am getting stuck with the BRRRR strategy, obtaining the second mortgage. I have started calling around my local credit unions including one I am a member of and they all tell me that in order to count rental income towards my qualifying income I have to have 2 years worth of claiming the money on our tax returns. Does any body have a way around this? or does anybody know what the current debt to income ratio limits are for obtaining a second mortgage to purchase a primary residence?

Any and all information or advice is much appreciated!

Thanks!

- Caleb 

[Christopher Phillips]

@Caleb Waller

Not really.

What you're doing isn't really a BRRRR. It's more of a house hack since you are living in the property.

BRRRR Is buy at a deep discount, usually with a hard money loan. Rehab it. Rent it out. Then cash out refi so you can repeat. Not live in it.

To get around the 2 year requirement of being a landlord, you can find lenders that will accept signed leases. But since you're living there and hoping to do more rehab, that's not going to be easy to pull off.