How do you use the BRRR method to pay off a home?

[Mike Brown]

For example, say you buy an $80k home with $20k down and spend $15k in renos. It goes up to $125k after a year of "seasoning", which is an increase of $45k. In newbie terms, what is the process of using that $45k increase to pay down the original mortgage balance? The reason I want to do this is so I can get higher cash flow from the properties.

[Morgan Eriksson]

you're thinking about this wrong. you unfortunatley don't get to lower the mortgage amount.... So your new value of the house is now 125k, your orignal loan is 60k you now have have 65k in equity, (vs the 20k you had previous). So think of refiancing as re-purchasing the home at a higher cost. so now if you refinance a bank will require you to keep 25% equity, some require 30% in the deal. So refiance the home, leave 25% in (roughly 31k) and the bank writes you a check now 34k. your new loan amount is 94k...(montly payment goes up) BUT you can now take that 34k (tax free!) and deploy that into another deal and repeat the process. so now in theory you own a property for basically 1k out of pocket (minus closing fee's for the refiance)