BRRRR

[Tyler Goulden]

After reading The Book on Rental Property Investing I am really interested in starting out house hacking and moving on to the BRRRR strategy after I build more capital and understand the game better. But I don't fully understand how refinancing gets you all of your invested capital back can anyone further explain this process to me?

[Oz Pariser]

I'm no expert by any means, but I can try to explain it to the best of my understanding.

Say you find a house with an after repair value of 200k and you can buy it for 120k, put 30k into it - so you're into it for 150k, then you refinance it and the refinancing lender gives you a 75% loan to value refinance, you've now pulled back out your original 150k plus you have 50k worth of equity already. This works if you pay 150k out of your pocket or if you get a hard money loan to originally finance the deal or whatever. The refinance reimburses the 150k to whomever put it in. So you can now use that for the next deal. As I understand it this only works with value add deals, ones where you can get forced appreciation by rehabbing the property. If you bought a property at retail value there would be no value add so if you were to refinance and get 75% LTV you wouldn't get all your money back to use for the next deal.