BRRRR Indepth Explanation

[Craig Gray]

Hey Guys,  

Ok so I'm confused as to whether or not BRRRR strategy can be utilized by taking out a loan to buy the property and if so please explain how I can turn that into positive cash flow. And also if you buy the property cash do you then refinance a property that is already paid for in cash? How does that work?

[Gary Parilis]

I don't know why @Todd Rasmussen says cash flow tends to be very thin on BRRRR deals. If you're buying in a market in which the ratio of rent to value is high, then you should cash flow well.

@Craig Gray you asked for an in-depth explanation... Some numbers should make it simple:

Start with $75k. Buy for $50k, rehab for $25k, new appraised value = $100k. Now you refinance at 75% LTV. So you get your $75k back, and you've got an investment with no cash of your own in it. Then use that same $75k for the next property, etc.

This example doesn't account for closing costs, etc... And don't necessarily expect to get all your capital back. But you get the idea.