BRRRR Deal Analysis Help!

[Edward Pulido]

So I have a few SFH's that are rented out, and I have thought about trying the BRRRR strategy for a little while. I am having trouble wrapping my mind around this deal and would like someone to look it over before I make a decision. I am planning on getting a conventional loan for the first part and then later doing the cash out refinance.

Purchase Price: $125k

Down Payment: $25k (House is eligible for conventional mortgage)

Rehab: $25k

Appraises 6 months later at: $190k

20% down of $190k is $38k

So the new loan would be $152k. Here is where I'm stuck. Since I am in this deal at $150k, does this mean I make $2k? I didn't take into account closing cost, which will probably negate the $2k, but is this a semi-accurate way of analyzing the deal?

Thanks!

[Darren Budahn]

The goal with the BRRR strategy isn't to be making an immediate profit per se, the goal is to recycle the same money over and over again. So if you were into it for $150k after the rehab, and were able to cash out for $152k in 6 months, then you would be able to use the same funds on the next deal, and the next, etc. You are planning on renting out this house correct?

Keep in mind it may be difficult to cash out at 80% LTV on the refinance. Also keep in mind that since you are not purchasing with cash initially, you will be paying closing costs twice. Most importantly, make sure your numbers are correct and that you can refinance in 6 months.