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Innovative Strategies
Account Closed
  • Statesboro, GA
24
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99
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BRRR strategy confusion - Refinancing

Account Closed
  • Statesboro, GA
Posted Oct 11 2015, 22:38

I'm confused on the refinancing part of this strategy.

For example, with obviously hypothetical numbers, you find this situation:

Purchase: $70,000
Rehab: $35,000
ARV: $150,000

So, your total investment is $105,000. You rent it out 6-12 months (however long it takes to be able to refinance), and the bank offers 70% of ARV ($150,000), which is $105,000.

This may seem like a dumb question, but what is the benefit in this? You were originally in the hole for $105,000. The bank pays back that, but you're still in debt because it's taking another loan to pay it. It's like paying off one credit card with another from my perspective. What am I missing?

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