Refinancing a Rental

9 Replies

I am interested in the brrrr strategy but have a question on the refinancing part. My wife & I own a duplex that we rent out both sides. We have about $660,000 in equity and have owned it for 3 years. I spoke to a couple mortgage brokers about doing a cash out refinance with only $35,000 cash out and it already made it not worth the refinance. Our payment would have been more per month. My question is, that if this doesn't work in this case for just $35K out of the $660K in equity how could you ever get your money invested back using the brrrr strategy?

@Bradley Adams - Your payment in general will go up if you are more in debt, yes. The theory behind brrrrrrrrr (new name, ancient concept) is that it's offset by you putting that money to work in some productive way that earns more money than you are paying to have access to that capital. 

Yep, like Chris said, let's say you cash out refi X amount of dollars, that you will pay at some rate (let's say 4%), use that money and invest in something else with some return higher than the assumed 4% rate example.

BRRRR is about leverage - so your monthly primary note may go up but if you can use $35,000 to put 25% down payments on a bunch of rentals in some market that supports that, your net cash flow gets you the higher return on your money overall.

@Christina R. I am definitely on board with that.  The only thing is that I live in the SF Bay area and you can't find anything Even close to that price around here.  I would love to put a $35,000 down payment on a rental in another market but I don't see how I could rehab it.  Then I couldn't get to the refinance or repeat.  If you have any ideas I'd love to hear them.