Updated almost 8 years ago on . Most recent reply
BRRRR Strategy New York
Hey everyone. Newbie here. I just wanted to know in regards to the BRRRR strategy when it comes to the refinancing part I am a little confused. Is this only worth doing for cash deals? I feel like if I would do this with a purchase-rehab loan I am going to pay closing cost for the original loan then closing cost again for the refinance and it is possible that the rate might be higher than the original rate. Am I missing something?
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With the BRRRR strategy you are keeping the property as a rental. So instead of selling for your profit when you refinance the spread between what you put in and your ARV would be your equity. You pay off your first lender and typically go get a traditional bank loan to reduce your interest rate. You can draw off this equity and using your example, you would theoretically have 70k in equity now which the bank would let you take a line of credit off of. If you got a 70% loan to value for your line of credit you would then have 49k to use for your next property. Hope that makes sense!