Are my numbers correct?

[Jason Rowlett]

I have a condo that has risen in value and I would like to borrow against the equity to reinvest in other properties:

• Current condo value: $315-325,000 
• Current mortgage balance: $131,000
• Equity line I would like to reinvest: $125,000
  • $100,000 split among 5 properties with 20% down on each
  • $25,000 cash left in a reserve account for repairs/unknowns

My question is, if I put down $20k and borrow $80k to purchase the first rental home wouldn't that knock a dent in my ability to borrow again to purchase a second home with $20k down, borrowing another $80k? And then perpetually with a third, fourth home, and so on?

OR, do I wait to rent out the first, keep my equity cash in reserves and once I have a cash flow from the first rental, use that cash flow as a separate source of income with which to apply for a second loan to purchase a second rental home? (And then repeat with two cash flows to buy a third, and so on)? 

As a side note to factor in...I cash flow about $230/mo on my current rated condo and my day job earns me about $2200/mo.

I hope my question makes sense!

[Nick C.]

It really depends on the bank. Most banks will require a seasoning period before they will count the rent as income. Could be 6 months, could be 2 years. 

Your best bet is to find the smallest bank you can and show them your plan before you start buying. You will hear more "no's" than "yes's" but the good news is you only need one of them to understand and believe in the plan.