"Refinancing" Part of BRRRR
Hello,
Still trying to wrap my head around the refinancing part of BRRRR. I'm reading the book currently and taking notes as a go, but have already developed a few questions:
1) Ex: I find a private money lender to buy property (say $100k), I invest an additional $20k into rehab, ARV is $200k. When we go to "refinance" we are given 80% of ARV ($160k), then do we have a loan/mortgage on the remaining $40K? Would our loan/mortgage payment be pretty low assuming the loan amount is now only $40k?
1a) Assuming we are given the 80% of ARV, once we pay back private lender, we are free to invest the remaining amount on another property and repeat the process (hence BRRRR)?
I have been familiar with this process for a few years, but just now pulling the trigger and diving in. In the past, I was under the impression you needed to put 20-25% down on investment properties. At that rate I could only average 1 per year (I currently own one door). The subject of private lenders is relatively new to me, but I can already see the great benefit it provides and how it can open up many doors (yes, real estate pun intended)!
Thanks in advance on any feedback,
Zach (Structural Engineer In-Training in Indiana)