What does refinance means

[Keleisha Carter]

So I've read so much about refinance in BRRRR strategy, but I still don't undersetand the refiance part. Can someone explain?

[Ryan Brocklebank]

@Keleisha Carter

The idea is that when you rehab the property you add enough value such that it appraises for much higher than previously or than you purchase + reno. Typically banks will let you refinance at 75-80% of the appraised value which would allow you to pull all of your cash out.

It's always easier with an example:

1. Say you purchase for 100k (laughably low where I live...). Say you put down 25k as DP.

2. Reno is 50k

3. You are now all-in for 150k (75 of which is cash)

4. Appraisal comes in at 200k.

5. Bank let's you do a cash-out mortgage for 75% of 200k which is 150k. 75k goes to the original loan amount on the 100k purchase and you pocket the other 75k and move on to the next one.

I hope that helps!