What are the pros and cons about BRRRR and I understand about increasing the ROI. But say the market crashes you refinanced you're properties to the max (75-80% of the value) wouldn't the risk of losing everything be higher? And the point of refinancing is to have cash on hand even though you increase the risk? I'm just trying to figure out what is best
I'm just trying to weigh my options. I would say I'm conservative and like to play it more on the safe side
Depends on what you plan on doing with the cash. If your intent is to use that cash to obtain more cash-producing assets, then in theory you should be reducing your exposure. If the property barely cash-flows without a loan, on the other hand, it was probably not a good rental candidate to begin with and an even worse brrrr candidate. If that's the only money you have on earth, however, trying to access that cash in a declining market is going to be much more difficult than accessing it when times are good - and in that case, if you weren't inclined to sell, for whatever reason, you might want to get your cash back out of it and sit on it as reserves.
BRRRR method is actually really fantastic. Very few cons.
you get equity, you get cash flow, you get leverage (and that means cash in hand!)
You asked what if the market crashes, but what does that mean? Home values go down? so what, you're in it for rent, not equity. The market will come back, and you won't even notice the dip.
You refinance to trade equity for cash, they are equal in value but liquidity is worth much more. Putting your cash into the house and not refinancing is the real risk.
Leverage, although widely misunderstood, is the safe side.
Ok that makes sense..
Would this property be a refinance candidate to you?
Mortgage I+T: $370
Rent: I live here but rent goes for $1,100 in my neighborhood
Valued at $120,000-$130,000
@Logan Larochelle Yes. That is a home run BRRRR. Even if it was worth 120k you still could get a loan for $90k leaving the 25% in. If you wanted to be conservative you could leave even more money in also.
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