Brrrr Cash Out refinancing confusion

[C-Dell J.]

Hello good people. I'm preparing to purchase another rental property and considering using my HELOC. My plan is to use the BRRRR method. The refinance step is confusing to me. When I google Cash -Out Refi Calculators, I see how to cash out the equity. But BRRRR shows me to cash out 75% of ARV.

Example 1:

house purchase is $100k. Rehab $25k. ARV $175k.

How do I cash out $100k -$125k vs 75% of $50k(the equity)??

Example 2: purchased house over 6 months ago with a loan. Current balance $60k. ARV $83k

How do I cash out 75% of ARV vs 75% of $23k (the equity)??

[Jeff Cichocki]

@C-Dell J.,

The right answer is the one that works best for you and the deal. Conventional and private money will be the cheapest. Hard Money will be anywhere from moderate to expensive. Interest rates, terms, fees, etc will vary based on the quality of the deal, your credit score, liquid assets and the specialty of the lender. No one lender is perfect or right for every deal. All forms of lending should be considered. If you discount a particular form of lending, you will miss out on deals that would have made sense with that type of loan. 

While I am a lender, I am also an investor. As an investor, I consider every type of lending option available to me at the time I am looking to buy it. I would hate to lose a deal because I listened to someone who said it was too expensive. The cost of the money is relative to the deal. If the deal will support it and you'll still make what you want, how is it to expensive? Especially if you would have lost the deal without it.

Something to consider when you hear how HM is too expensive.

Good luck!