Need someone to explain the refinance part of the BRRRR

[William D.]

I cant grasp the refinance and cash out portion of this strategy. I need someone I can call, I cant comprehend it any other way.

Home under contract to purchase for $110,000

Put down 20% ($22,000)

Get a loan for $88,000 to cover the full purchase price.

Then put in another $15,000 of improvements to get it “rent ready”.

• Sales Price: $110,000
• Down Payment: $22,000
• Loan Amount: $88,000
• Closing Costs: $3,000
• Carrying Costs: $1,300
• Rehab Cost: $15,000
• Potential After Repair Value (ARV): $150,000

Property appraises at $150k now what?

[Adri Jusczak]

Hi William, 

Great question! Buy, rehab, rent, refinance, repeat. So, you buy the property at 110k. Your total amount you have into the deal is $41,300. After you fix it up, you rent the property out with the numbers in mind of a refinance (use the BRRRR calculator on BP). After it's rented, you apply for the refinance, try to find a lender that will give you 80% ARV. 80% of 150k is 120k. There would be some closing costs in there that you can either pay out of pocket or wrap into the loan. The refi would pay back your original loan (typically there is a 6 month seasoning period, so let's say you owe 87K at the time of refi). You would then get the remainder of the refinance check, roughly 33k back to you. This is why the BRRRR method is great, you would have a rehabbed, rented, 150K house with only $8,300 invested in it!