Understanding the BRRRR cash out/new loan

[Ahkeem Smith]

I planning to do my first BRRR strategy around next spring, but I wanted to make a few things clear first. I understand the basics up until after the refinance. Once we're able to cash out after the new appraised amount was given, does our new 30 year (or however many year your loan is for) mortgage start from scratch? Ex.

Buy for $50,000

Put down $10,000

Rehab $15,000

New value $90,000

Total invested $25,000

Cash out at 80% of value to have $72,000 in cash

New loan ?

I hope I’ve made sense of that. If I am missing something please correct me.

[Josh C.]

Correct. Couple of notes. Typically it’s done with cash or equivalent. Also, finding a bank to do 20% down on a house that cheap will be tough. 25-30% down will be more common. Also, the cash out refi or refi will most likely be 70-75% of appraised value.

But that’s it. And if you find a good one you can even walk away with a big fat check at closing.

Good luck!