Question on the BRRRR Method

[Eugene Cho]

Im reading David Greene's book on the BRRRR method and had a question. Let's say I have some cash and want to buy a property for$50K + $15K for rehab (total $65k). In 6 months I want to do a cash out refinance. Let's say the appraisal comes back at $90k and the bank loans me 70% of the ARV which comes out to $63k. I now have less cash than when I started and only have enough cash to do 1 more house. If I keep doing this I'll only have enough money to buy 1 property in series. How do I grow exponentially? Brandon Turner always talks about "the stack", growing exponentially year after year. If I only have enough cash to buy one property at a time how do I get enough cash to buy 2 the next year, and 4 the year after that? I am also reading Brandon Turner's book on low and no money down investing and I'd like to avoid using hard money or an FHA loan (which would defeat the purpose of BRRRR investing) and only use the cash I currently have. Thanks for your help in getting me started.

[Ryan B.]

As you note, you can recycle your money about every 6 months.  Once you do that, you'll presumably have rent coming in and your day job money coming in to get you back to $65k from the $63k that you got from the cash-out refi... so you'll still have $2k in the first property, but you are much better off than having to get a whole new $65k.  Next, if you find the right lender, you won't have to wait 6 months in between deals.  The key is to get a substantial chunk of your invested cash back out of each house to use on the next deal.  Furthermore, once you have two years of landlording under your belt, lenders are more apt to consider the landlord income in your borrowing profile... so again, it becomes easier to borrow. 

In sum, even if you only have enough money to do "one at a time" that does not equate to doing one per year... the velocity at which you do them increases as you become more practiced at doing it.