When will the banks say no because of how much house debt I have

[Ari Dandridge]

My business partners and I are wanting to do the BRRRR strategy but we have a concern that comes into play more long term.

let's say we buy a property refinance it and do a HELOC on that money we get from the refinance. We then use that money on another property. And then we try and repeat the process. At what point are the banks going to say "no you have too much debt in houses"

Is this a valid concern?

[Bill B.]

If you put down 75%, do the rehab and then refinance. You’re still only going to get 75% of that new value. (Buy for $300k, put $75k down and borrow $225k. You put $50k into upgrades and it’s worth $400k. So you can borrow 75% ($300k) and you e only got $25k in the deal. As long as it’s cash flowing at that payment you should be fine. But it doesn’t mean it will. You might add 25% to the value but you increased your loan 33% and might only increase rent  10-15%. 

Assuming it cashflows and you have good credit you should be fine. “Back when it was hard to get a loan.” (2011-2015) I got 10 loans while unemployed (about $12k/mo total) because each property cash flowed. 

Don’t take out more debt than the property can pay on its own and you should be fine.