We just finished refinancing our first BRRRR property! Time to repeat the process!

We learned a lot on this first one. It went better than we anticipated it would. We had a fantastic team helping us out and are so grateful for all of you in this community for all of the information you've shared and your support!

We just finished the most nail biting part of the BRRRR (Buy, Rehab, Rent, Refinance, & Repeat) process - the refinance! Which means we only have one step remaining - Repeat!

The refinance was the most stressful for us many reasons. First and foremost, the ENTIRE process relies on a successful appraisal so that you can get approved for the loan amount you need to meet all the numbers you crunched to cover all of the costs (purchase and rehab) of the home. Secondly, it's our first refinance out of a hard money loan - the unknown! And finally, we had never done a cash out refinance before, so we knew it would be weird getting money at closing!

This was our first BRRRR property and honestly we went into it expecting the numbers not to be great when it comes to this methodology. We were expecting that our purchase and rehab would be about 100% of the LTV (loan to value), when a good BRRRR is 75% or less. We wanted this first one to be a learning experience and figured having a big rehab would give us that experience working through the entire process. We expected to leave our 20% down payment in the property and plan for the 75% of the loan to cover our hard money loan if all worked as planned.

With the housing market taking off leading up to the refinance, this put us in an ideal position to possibly consider doing a cash out refinance instead of a standard refinance. Meaning, we expected the appraised value to be high enough, that we could take a loan out that would both cover our hard money loan (purchase and rehab costs) AND take some extra cash out. That extra cash would be ideally be around our 20% down payment we put down to purchase the house. That took our planned three months refinance to the six month, but if it meant getting our 20% downpayment back, we were game. A gamble, given it was a guess the house would appraise for what we expected.

When we originally discussed this with our agent and mentor, these are the numbers we presented. A note about our process - we run our numbers pretty conservatively for the ARV and rent, assuming worse case scenario:

• Purchase: $60,000 (listed for $75,000)
• Rehab: $65,000
• ARV: $130,000
• Rent: $1,400
• Hard Money Loan: 12%, 3x points, 1 year term - interest only payments
• Return on Investment: 7.1%
• Cashflow: $342 (amount remaining after mortgage payment, 10% vacancy, 5% Repairs/Maintenance, 5% Capital Expenditure, 10% Property Management are paid)
• Purchased: March 2021

When you refinance, most banks will authorize a loan for 75% of the Loan to Value (LTV), so we were expecting a $97,500'ish loan (75% of $130,000). We knew we'd be leaving a lot of equity in the property (our down payment), but we were viewing this first one as a learning experience with a big rehab, hoping it would make future rehabs easier because we had already been through a big one. Thankfully we had a contractor that friends of ours had used to do similar work, so we were incredibly lucky for that, meaning there was some trust in the contractor from the get-go, translating to less stress.

The housing market explode over the course of the rehab, which drove home prices up higher than we expected. Great news for an upcoming appraisal - we hoped! So what did the numbers actually look like after it was all said and done?!

• Purchase: $60,000
• Rehab: $67,500
• ARV: $190,000
• Rent: $1,549
• RoI: Infinite
• Cashflow: $286
• Mortgage: $135,000 @ 3.125%
• Refinance Date: November 2021

$190k!? We were optimistically hoping for $175k, but a couple of recent sales in the neighborhood, to include next door, set us up for success. We decided to leave some equity in the property with that appraisal amount; our new loan could have been up to $142,500, an extra $7500 plus the required 25%, but our goal overall was to maximize cashflow, so leaving equity in the property meant a slightly higher cashflow.

So what's next?! Our second property is on the same street. We paid a bit more for it given the rise in home prices but it was also in slightly better shape. We plan to follow the same rehab plan, given it worked so well for the first one, so fingers crossed Property #2 has a similar story to tell!

Property #1 was a great learning experience in many ways. I cannot thank my team enough for a successful first purchase! We learned so much and gained a lot of confidence in the BRRRR strategy.

Thanks again to everyone. Time to finish up Property #2!