Please help me understand BRRR strategy!
Hello all,
I tried my best to understand the BRRR strategy but not sure if this is right in my situation.
I have a first rental property purchased at 110K with a cash flow of 600. I rehabbed it with additional 15K in improvements. The ARV I expect to be in the 150K range. I used a conventional loan with 20% down.
If I refinance per the BRRR strategy for my next rental investment, I can take cash out of the refinance tapping in the equity, but does that not mean increasing the monthly mortgage on the current property?
I am trying to figure out the best minimal risk strategy for my next rental investment.
Pls see below. Does a ~18K cashout with a mortgage increase of 80.00 make sense or I am missing some thing?
Thanks in advance
| Purchase price | 110 | |
| Downpayment | 23 | |
| Loan amount | 87 | mortgage: 391 @3.5% |
| Rehab cost | 15 | |
| ARV | 150 | (Conservative could be higher) |
| Refinance amount at (70% LTV) | 105 | |
| Cashout (105-87) | 18 | |
| New loan amount (increase of 18k) | 105 | new mortgage: 471 @3.5% |
Thank you in advance!