Stay The Course?

Question

During COVID, my brother and I acquired our first SFH, which we have lived in over the last 5 years. Since then, we have acquired an additional SFH and a duplex earlier this year. The SFH cash flows ~$950 / month (10.3% cash-on-cash return). We are planning to renovate the duplex and move into each side later this year (finally needing our own spaces), which will allow us to rent the other SFH at $800-$1,000 / month positive cash flow (~11% cash on cash return).

The duplex will eventually be refinanced into a residential loan and should cash flow ~$500 per door after renovations (again between 10%-11% cash on cash return). All three properties are in A/B class communities and have significant appreciation upside over the next 10-15 years.

When we refinanced the one SFH last year, we only pulled out about 80% of what we could have, leaving the overall LTV at 69%. We would like to scale faster, but prefer having strong cash flows at our properties. For those that BRRRR properties, are you taking out the maximum amount on the refinance to fund future deals or leaving some room for cash flow?

Chris Seveney · Answer

I do not take out max amount because I like to sleep at night and if there is softening or vacant unit etc. the cost is much easier to absorb.

Greg Kasmer · Answer

@David Graham - You're asking a good question about portfolio strategy. It also depends on your future perspective of interest rates. If I think rates will go up over the next few (1-3) years, I would tend to take out higher leverage knowing that it will likely be able to "lock in" a lower interest rate. Additionally, as Chris mentioned it's also about your risk tolerance level and your ability to do something with the cash you pull out on the refinance... If you have a good deal to redeploy the capital I would tend to take our more cash. Good Luck!

Pierre Guirguis · Answer

You’re in a good position, but it really comes down to what you’re optimizing for. If it’s stability and strong cash flow, staying in that ~65–70% LTV range makes sense. If it’s scaling, that approach will slow you down. Most BRRRR investors push leverage closer to 75%+ and accept thinner cash flow to keep recycling capital.

The tradeoff is simple:

Lower leverage = stronger cash flow, slower growthHigher leverage = tighter cash flow, faster scaling

Where it goes wrong is forcing high leverage on deals without enough margin. That’s how small changes in taxes or insurance kill the DSCR. A good middle ground is being selective. Push leverage on your strongest deals, keep cushion on the thinner ones.

Rod Hanks · Answer

@David Graham

You’re in a good spot—strong cash flow and low leverage is how you stay in the game long term. I’ve done both ways, and honestly the ones where I maxed out refis looked great upfront but got tight real quick when something went sideways.

These days I usually leave some room, keep the cash flow healthy, and scale a little slower but safer. That flexibility matters more than squeezing every dollar out.

Sounds like you’re already doing it right.

Stacy Raskin · Answer

It's helpful to think about what you will be using the cash for and if for additional properties, how strong those deals are. Most of the time in most places, markets and rents appreciate. Also, it's very specific to your individual market as some markets are more appreciation markets while others are more cash flow markets and some are a mix. If you know you will be in the market long term, it can be a win to use the refinance cash out to build your portfolio in a way that makes sense for your real estate portfolio goals.

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