BRRR Strategy Question

[Claudio Golia]

I'm sure this is a real noob question, but I'm curious as to how the refinance part of this strategy works?  

Assuming you are able to refinance for 70% of the ARV, how do you utilize the funds from the refinance to pay back your original lenders (e.g. private/hard money) and start again?

I feel like I'm missing something very obvious in this step?

Thanks and appreciate your patience in this learning process.

Claudio

[Joshua Springer]

Buy home for 50k

put 20k work into it

home is now worth 100k

bank refinances 70% of 100k for $70,000 going to "you".

You owe 50k + 20k to hard money lender.  You give money from bank to hard money lender to pay debt.  If hard money lender is a lien holder bank will pay them directly.

you get $0 cash out of deal but now control a property with 100,000-70,000= 30,000 in equity.

as bill said make sure A) you will qualify for the cash out refinance and B) Their seasoning/LTV requirements.