All Forum Posts by: Nico Timpani

Thanks for all the information everyone! Your responses helped me understand the long term benefits of BRRRR and after doing some math on it, I definitely see how BRRRR can pay off in the long run.

Hi all,

I am a relatively new listener to the BiggerPockets podcast and have no real estate investing experience. However, I am thinking about getting into it and want to learn as much as I can before diving in.

That being said, I am having some trouble wrapping my head around BRRRR, particularly when it comes to the refinancing part. I know that this is a topic that gets discussed a lot, but I haven't seen anyone answer my specific question. So here is my understanding:

Buy - Suppose I buy a house with my own money for $80K

Rehab - I spend $20K fixing it up and the ARV is $130K (so I am $100K all in at this point)

Rent - I rent it out instead of flipping, which also helps with the refinancing. Let's say I can rent it out for $1000.

Refinance - So I go to the bank and do cash out refinancing and let's say I get the $100K I put in back. So now I have ~23% equity and $100K in cash.

QUESTION: What I haven't heard talked about is that now I just went from having no mortgage payment to having a mortgage payment on a $100K loan. So yes, I got $100K in cash, but now I have a mortgage payment cutting into my cash flow. So based on a quick cash out refinance calculator estimate with a 4.3% interest rate, I got a monthly payment of ~$700. So now I go from having a cash flow of $1000 per month to $300. Over the course of 30 years, that adds up to about $252K in lost cash flow from paying down the new loan. So I understand the time value of money and being able to make another deal, but wouldn't I also be losing out on a ton of money over the course of many years by doing this? It seems like if I was only occasionally buying rental properties, it wouldn't make sense to BRRRR. Assuming all of this makes sense, how frequently would I need to buy properties for BRRRR to work?