Brrrr - How does it work with “debt to income ratio”?

Question

With the BRRRR method, how can you own 10 properties or more and not be effected by “ debt to income ratio”?

Jerry Padilla · Answer

@Mel HarsH

As mentioned working with an investor friendly lender will allow you count rental income that is reflected on your tax returns, as well as 75% of lease agreements that are not reflected on your taxes if it is too soon, and 75% of rental income on new purchases. This is how many investors are able to reach 10 properties with conventional.

Mel HarsH · Answer

Thank you, but I have Watched the BRRRR Podcast and bought the book. I didnt see or hear anthing about DTI. Im still not understanding how they tell you all the ways to get money to purchase 10 properties a year, but dont tell you about DTI.

Ryan Deasy · Answer

@Mel HarsH i have done BRRRR a few times. i am not a mortgage broker. how i understand it is, it’s all about your monthly obligations not necessarily the fact you owe 300k on a duplex. that’s how they calculate DTI, based on monthly obligations. most will give you 75% of what you make in rental income as credit on top of any income you already have. so if you have a good cash flowing rental and they are giving you 75% of your rental income as credit to your income and you only need to be below about 45% DTI it is doable. furthermore, if you are buying another place, usually they will give you 75% of the income the new place generates even though you don’t even own it yet.

Tom Shallcross · Answer

@Mel HarsH - commercial financing underwrites much differently than residential, and there are attributes around the deal they are evaluating instead of the personal DTI.  If you were trying to get residential financing for all 10 deals, then yes you would need a large income to off set all the mortgages.

Also, my properties financed in my LLC do now show on my credit report even though I'm a personal guarantor.

Brrrr - How does it work with “debt to income ratio”?

Most Popular Reply