BRRRR... but with financing?

[Gayle Melnick]

Hi everyone,

I'm new to real estate investing. This website has been a great resource. I've been making my way through reading basically everything that Bigger Pockets has published.

I'm currently reading about the BRRRR method. I was wondering if the BRRRR principles could be applied to a conventional financing situation by buying a property that needs work but would still qualify for conventional financing. The purchase price + rehab costs adding up to 70% of ARV. Rent the property out, then do a cash out refinance to recover the initial capital. I tried to see if this would work running the numbers with a deal I'm looking at.

Purchase price: $82k

ARV: $134k

Down payment at 25%: $20.5k

Loan: $61.5K

70% of ARV: 93.8K

Rehab budget: 93.8k - 82k = $11.8k

Cash out refinance for 80% of ARV = $107.2k

$107-2.k - $61.5k of original loan = $45.7k cash out

New mortgage of $107.2k with $26.8k equity

Total cash in: $31.5k

Total cash out: $45.7k

Would this work? Are any of my assumptions or calculations wrong? I didn't factor in closing costs, refinancing cost, etc. But I just want to know if the basic principle would work.

Thanks!