Rental Property Investor · Tulsa, OK area · Member since 2019 · 4 posts · 0 votes
So I'm a newbie. Like REAL new. Just in my education gathering phase. Currently reading Brandon's book on Rental Property Investing. The BRRRR strategy intrigued me, but.....how exactly do you get your CASH back during the refinance? Ever write a very common word down on paper and for whatever reason that day it just doesn't look spelled correctly? I'm thinking maybe it's so obvious that's it's confusing me, but I've only purchased two personal residences in my life and never refinanced. If the after rehab value is $150K and you refi after the rehab phase for $105K is the bank writing you a $45,000 check??? The way it's written is making it sound like money is literally coming back to you, not just in the form of equity because it is then used to "repeat" the process. I'm not clear and don't want to ASSume. Please clarify/confirm what may be right under my nose but doesn't seem right for some reason.
Mortgage Broker · Dallas, TX · Member since 2017 · 657 posts · 275 votes
7y
A lender doing the refinance will give you between 70-80% of the value after it is renovated aka the ARV. Buy home for 50k put 50k into home now you are 100k all in. After work is done home is worth 200k well bank will give you lets say 75% of the new 200k value. That is 150k max of a new loan the bank can give you. 150k from new loan - 100k of your all in costs leaves 50k back to you as "cash" to use for whatever...normally for the next home.
Rental Property Investor · Tulsa, OK area · Member since 2019 · 4 posts · 0 votes
7y
@Nicholas Covington Thanks! I overlooked the difference between the original financed amount and the 70% ARV amount. That's where the cash spent on rehab comes back in cash form. Got it now. Thanks.