Financing Options for BRRRR

[Noah McPherson]

Hello BP,

I'll keep this simple. Can you guys open my mind to financing options for newbie BRRRR investors? I currently own one rental I bought off the MLS.

[Lucas Miles]

@Noah McPherson can you explain a little more about your question? The refinance R in BRRRR works when you have equity in a property you've purchased, and you want to deploy this equity by refinancing. Say for example you bought a property for 100k at a discount because it needs rehab, bank gives you a 80% LTV loan, your down payment was 20k and you funded a rehab for an additional 10k. Your cash invested is 30k total. Now assuming you get a new appraisal and the property is now worth 150k. You get a new loan at 80% of your 150k, so 120k. So this this 120k pays off, 1. your first loan of 80k, 2. your initial 20k down payment, and 3. your 10k rehab costs. 1 + 2 + 3 = 110k. So you keep 10k (120k-110k) and you still own a cash flowing rental property. In this example you have 0$ (actually you were paid 10k) into this investment property so your ROI is infinite. Keep redoing this process over and over to grow a portfolio with little to no personal investment from yourself.

The key is to find these properties where the numbers work!