Hesitant to use BRRRR- I need some advice

[Ryan PRice]

I've considered using the BRRR strategy over the past several years, but I am having some trouble coming to terms with the decreased differential between the monthly rental income and monthly PITI.  I just started the refinance application process with a current lender for one of our properties to get more specific insight into how this might play out.

I have purchased a SFR rental 5 years ago and a second rental 3.5 years ago. Raising funds (via saving) for a 3rd has been taking much longer than anticipated, and the prices of houses have gone way up in the past couple of years in my area.

Here are the current numbers/facts on the property that I am considering a cash out refinance for.

2 bed, 1 bath. SFR ~1000 sq/ft.

Purchase price $59k

About $23k total cash in (down payment, closing, repairs-- mostly sweat equity)

Monthly PITI $360

Rent $850

Current Value- $120-$140k

1-1/2 Story cape code, with possible potential to add a 3rd bedroom, bath, plus extra room to the unfinished attic, currently only pull down stairs, but it has 2 dormers, 2 side windows, plank floors, and lots of standing room. 

I just got 3 scenarios from my lender (Mr. Cooper) for a cash out 30yr refinance.

#1     4% rate- closing cost of ~$14,800 (wrapped up in mortgage), and $38k cashout. Result is a

PITI- $591

#2     5% rate- closing cost of $9,300 (wrapped up in mortgage), and $42k cashout.  Result is a

PITI- $648

#3      5.875% rate- closing cost of $?? I didn't get this number?? (wrapped up in mortgage), and $60k cashout. Result is a

PITI- $772

My biggest concern is that I'll be reducing my cash flow on this property significantly.  I understand the upside to this is getting another property, and getting back that cash flow back from that, having tenants pay down another property, possible appreciation, an increase in equity after rehab, more tax write offs etc...     However, I am still having trouble getting over how this complicates things more and more.

Ultimately I would like to cover my income (and my wife's) with cash flowing properties, but I would like to do so with as few units as possible. I'd rather have 20 fully paid off, heavy cash flow properties than 40 financed properties that don't cash flow as much.

Since we do NOT have a high income I need to find ways to expedite this process, but without being over-leveraged and uncomfortable. Perhaps some of you will have some insight as to how we might meet our goal and not stay up at night worrying about the small difference between PITI and Rent.

I'm a big fan of being frugal, and cutting out expenses, always being things used etc... but we do have 2 teenage kids that eat up (literally and figuratively) a lot of our money.    If it weren't for them we would move to a small cheap house in an area with very questionable schools, and save a ton of money every month.  We have also considered live in flips-- but I don't think we want to our kids or ourselves through that.