Understanding BRRRR cash out/loan process

[Ahkeem Smith]

I planning to do my first BRRR strategy around next spring, but I wanted to make a few things clear first. I understand the basics up until after the refinance. Once we’re able to cash out after the new appraised amount was given, does our new 30 year (or however many year your loan is for) mortgage start from scratch? Ex. Buy for $50,000 Put down $10,000 Rehab $15,000 New value $90,000 Total invested $25,000 Cash out at 80% of value to have $72,000 in cash New loan ? I hope I’ve made sense of that. If I am missing something please correct me.

[Michael Lee]

Hello again Alkeem!  Just to be clear on what will probably happen is that you probably will not handle any cash.  The first loan will be paid off during the 2nd loan closing by the title company and they will set up your 2nd loan in the full amount that you borrowed will be set up by the title company. you walk away from that closing with any amount of money that is over the amount borrowed, if any, in the form of a check made out to you by the title company or the Attorney depending what your state rules.  I am in Texas and I do not know what your state requires.  I hope this helps. 

Best wishes.