Cash Flow on a BRRRR

[John Paul Whaley]

This may be a stupid question, but I want to make sure I am understanding everything correctly.

When you are preparing to BRRRR a property, you have your purchase price, repair costs, holding costs and ARV, amongst other things. You are prepared to rent the property out at your estimated ARV at 70% to 80% LTV (or whatever LTV you prefer), but what if your property appraises for much higher than you expected?

I understand this is a great problem to have, but don't you need to consider the possibility that your property will appraise for much higher than your initially expected ARV? In this case, your mortgage payments could be much higher and there might be a smaller margin for cash flow.

Am I missing something here, or do people not really worry about this problem because an underestimated ARV isn't exactly a "problem".

Thanks! 

[Seth Ferguson]

There is no obligation to finance a property to the maximum approved amount.

My thinking has always been that I would much rather have all my capital out of a deal with minimal cash flow than have dead equity stuck in a deal collecting dust. I'm able to do much more with that capital after the refi.