Does BRRRR only work on higher value properties?

[Philip Sriployrung]

I bought my first rental property (50k) about a year ago and haven’t refinanced yet due to high closing costs (~3.5k) relative to the cost of the home and the cash I put in (10k down).

The cash out refinance sounds great (home value ~65k), but after purchasing and refinancing that’s about 7k in closings costs vs my 10k investment. I’d be getting very little cash back after factoring those closing costs. (Of course I’m not taking into account my cash flow which has been about $200/month)

To the smarter more experience investors, is there’s something I’m missing here? What am I not taking into account?

[Jake S.]

Hey! I think the main issue here is you should have paid 70-75% of the ARV value for the home minus repair costs/closing costs.

So the most you should have paid for the home is $48k MINUS the costs of closing and repairs.

So $10k in repairs (guessing)
$3.5k in closing

$48k-$13.5k = $34k purchase price

If you bought this for the purposes of BRRRR, than the above is closer to what you should have paid

You went wrong by not factoring in the repairs and closing costs into the equation