basic BRRRR Refi question

[Kim Forgione]

I have a very basic question. Sorry if it's obvious but I want to make sure I'm getting this. Say using the 70% rule, you buy a property for 60,000 and spend 10,000 for repairs. And the ARV is 100,000. Assume you put 20% down in the beginning which is 12,000 and got a loan for 48,000. The goal is to do a cash-out refi after repairs in order to recoup the 22,000 you invested at the start, correct? Now this is where it gets murky for me. The bank will refi what percentage of the ARV? And how does the original 12,000 I put down come into play? To make this a good deal, what would be the amount of the refi and how much of that would be cash out?

[Kyle McCorkel]

@Kim Forgione

I think you are overcomplicating it a bit...

Banks will typically do about 70%-80% of ARV on the refinance. Let's say it's 75% in your example. So then you would get a cash out refinance for $75K, and let's say closing costs of $5K to keep numbers simple.

The leftover $70K would pay off your loan of $48K, and reimburse you your $12K down payment, and reimburse your $10K of repairs.  So yes, you would recoup your $22K invested.