Help Me Understand The BRRRR Method

[James Ashley]

I'm having a hard time understanding how the BRRRR method is beneficial. I understand how it can be used to buy a lot of property but confused on how this method actually makes you money.

As I understand it the BRRR method works like this (closing costs, fees, and down payment are left out to simplify the math). So let's say I want to buy a home for 50k. The home needs 15k worth of rehab. So I get a loan for a total of 65k. I put 15k worth of rehab into it and the property is now worth 100k. I then cash out refinance it for its remodeled value and get the full 80k (bank will only loan up to 80% of value). I pay the original loan off and now have 15k. I then take this 15k and do the process all over again with a new property.

How does one make actual money doing this? I understand that I now essentially have $15k but I also have a larger mortgage. Isn't this basically the same as going out and getting a personal loan for $15k? It's not actual $15k profit unless I were to sell the house, correct? On top of this I'm now getting a smaller cut from my renters because of the new mortgage. So not only do I have a larger mortgage I now have less monthly cash flow as a result. What am I missing here?