BRRRR strategy question

[Bradley Snyder]

Hello,

I am new BP and have been reading a lot about the BRRRR (to many Rs?) strategy, and I keep getting hung up on the refinancing part. For example: I am going to buy a $100K house that has an ARV of $200K. The home needs $30K worth of work, so I would be into it for around $130K. Once the work is completed, I wait 6 months to a year to go to a bank for refinancing to take $40-$50K of equity out of the house and then essentially repeat that process. The question that keeps stumping me is, when I refinance the original loan to take the equity, would that not raise my mortgage payment on the original house, therefore cutting down my potential profits on the next purchase?

Any insight will be greatly appreciated.

Also, any feedback on my usage of an example would be appreciated, so I won't sound like such a rookie next time.

Brad

[Clayton Plank]

@Bradley Snyder, Yes it would raise your mortgage payment as you are raising the mortgage to draw out the equity. I would look at the profits/cash flow of the current house and not into the future of your next house. Run the numbers on your first house with the increased mortgage to make sure your profits are there after the mortgage increase before you purchase the property if you plan on using the BRRR strategy. If the cash flow was no there then I would not purchase that property.