BRRRR simple explanation.

[Andrew Angerer]

New people, 

If any of you are having problems understanding the BRRRR method, I found this super simple explanation for it. It has helped me out a ton, hopefully it helps you too.

Please explain like I'm stupid (because I am): How does the BRRRR strategy help you pull money out when you refinance? : realestateinvesting

Insert what ever numbers you feel like

You buy a home for $100,000; You put down $20,000, meaning you mortgage $80,000.

You do repairs at a cost of $20,000; Home is now worth $160,000

You have put $40,000 into the property, worth $160,000; You rent it out, once it has income, you can refinance the property at somewhere near 80% loan to value, which 80% of $160,000 is $128,000

You owe $80,000 on a home worth $160,000, so you have equity of $80,000. Pull out the difference between $80,000 and $128,000 (80% of home value), or $48,000.

Congrats, you now have your $40,000 back, $8,000 profit, and a property that’s paying you.

[Eran Lifshitz]

@Andrew Angerer that is a very clear example which indeed help to demonstrate the advantages and strengths of the BRRRR strategy.

But your story is missing its end - 

Now you have $128K loan that you need to return.

Need to assure your monthly cash return from the rent is higher than your monthly loan payment so your cash flow will be positive (while taking into account unexpected expenses such as vacancy, repairs and such).