Paying back the investor using BRRR method

[Elvin Tolentino]

Good day everyone,

My name is Elvin and I am in the very initial stages of real estate investing. I have read in detail about and am very intrigued by BRRR. I know the basics but one thing I can't seem to grasp is how to pay investors back their money if you refinance and use the equity to buy more real estate.

Example: I partnered up with investors and was given 30K.

The beginning stages of BRRR go smoothly and I pull out 80K on the refinance portion. This is where one would move on to another property correct? But how would you pay the investor back? And how much would you pay back?

Thanks for any help.

[Scott Jensen]

Generally an investor is paid back when you refinance to traditional financing.  So, lets say you buy a property for $100k and an investor provided $30k for rehab and the property will appraise at $200,000.

You buy the property for $100k (your own cash, get a loan, whatever)

You fix the property for $30k (including holding costs, rehab costs, etc)

You refinance the property for as much as the bank will give you (75% of the new appraised value). 75% of $200,000 is $150,000 so you could pull that amount out, pay off your investor, recoup your initial costs and own a rental property. In this case you are pulling out $20k more than you put in.

Note: Those numbers as completely hypothetical. It would be pretty rare to find a deal that good in today's market.

Does that make sense?