Key Questions about BRRRR Investing

[Brian Bandas]

I'd like to dial in my execution of the BRRRR method. I've been flipping homes to create capital infusions, but that is only meant to be in service of purchasing more rentals at a faster pace without having to wait for 20% down payments.

I know the BRRRR method is another way to accomplish this, but I'm running into a conundrum.

Here's my understanding, and I'd love for someone to educate me on how to do this a little more effectively...

First, I am thankfully very bankable. I am under 20% of my DTI so I don't even really have to have a signed lease or renters in place to get the loan. But what I'm running into is the fact that in order to refi out without 6 months of seasoning on title, I must use the cash purchase variance--is this a Freddie Mac thing, I think?--which allows me to pull the money out immediately, up to 70% of appraised value.

HOWEVER, I'm also under the impression that that number is capped at the purchase price, regardless of equity percentage. So any money I put into renovation on top of the purchase price--even if the total still came in well under that 70% mark--would be stuck in the property, which would still limit my purchasing ability to how quickly I could save money.

At this point, I'm back at square one. Instead of saving for down payments, I'm saving for renovation budgets, I guess, but it's still very limiting.

I'm bankable and have a pretty solid foundation of understanding of how all of this works, with a handful of rentals in place and a handful of flips under my belt. I get this concept completely but seem to be one step away from really being able to rinse and repeat this.

What am I missing?