BRRRR Strategy. Is it a good strategy, or bad due to more debt?

[Sundiata Atiba]

So if refinancing creates more debt, why is the BRRRR Strategy so highly recommended? I read that you pay more on capital gains raxes and closing costs when you flip a property than you do if you were to hold the property and refinance it. Trying to build my portfolio, and create a decent cash flow. Wouldn't the BRRRR Strategy be the best course of action to take in order to do this?

[Andrew Syrios]

The BRRRR strategy does create more debt, and if you want to use a conservative strategy then debt should be avoided. But one of the biggest advantages of real estate investment is the ability to use OPM (Other People's Money). The key is to have good debt; i.e. debt that allows you to buy appreciating assets that have built-in equity (as you would with the BRRRR method where you have at least 25% equity above the debt) and the asset is cash flowing. If those two things are met, then the debt is good because you have an equity cushion in case the market goes down and you bring in more money than it costs each month (it should be at least $100/month positive).