Question regarding the BRRRR strategy.

[Luis Peguero]

So I'm a 21 years old learning the dynamics of real estate property holding and investing. I'm having a hard time understanding the BRRRR method and how your PML gets paid back.

OK so for example...

Let's say I need 100K loan from a PML for 12 months, interest at 10% with 2 points. From my understanding 2 points means I have to give 2K upfront. So where I'm partly confused is now during the rehab am I only paying the 10% percent interest only? Or the whole loan of 100K plus the 10K of interest for a monthly total? Next is after I refinance for the 70% appraisal value, do I get a big check from the bank of 70K? And if I did how would I pay back the PML because that still wouldn't be enough to cover my original 100K Loan. Help I'm so lost lol. Thank you!

[Joseph Weisenbloom]

@Luis Peguero During the period of a PML you will be paying the 10% of the loan amount every month or 10k in this case. At the end of the 12 months that is is when the 100k is due. It is an interest only loan meaning your monthly 10% payments dont deduct the principle amount due after 12 months. 

The goal is to raise the value of the property by fixing it up that way when you refinance it will pay off the PML. 

So for example if you aquire the house for 100k with a PML and you put 30k of your own cash into repairs. Lets say after fixing it up and adding value your new value is 185k. 

Well if you refiance that at 70% of the 185k valuation then you would get a refinance of 130k. That 130k would pay off the 100k PML and reimburse you for the 30k of your repairs.

After refinancing you esssentially have none if your money left in the deal. This is why the BRRR method is very popular it allows you to recycle your money and scale quickly.