BRRRR Strategies Hard Money

[Valentin Diaz]

So I was wondering when using the BRRRR method, how exactly am I paying the hard money lender back. If they lend up to 75% of the ARV? After the rehab, I refi, but that wouldn't be enough to completely pay off the hard money lender AND reinvest in another property. Please help I'm confused.

[Corby Goade]

It's simple- you have to buy a property that, once rehabbed, has 25% equity built in. Here's a simple example:

Acquisition cost: $50K

ARV: $100K

Rehab cost: $25K. 

Once the rehab is done, you've spent $75k, but the property is worth $100k. You go to a bank and get a conventional mortgage for $75K to pay off your HML and repay the rehab costs- your rent should be enough to pay for the mortgage and maintenance and leave you a bit of breathing room. Now you have a rental that pays for itself with no money out of your pocket and you are ready to repeat.