Advise Needed....on the BRRRR strategy

[Julian Perez]

I would like to get started with my first investment property, I have been looking into East Orange. The properties I have looked at will need some rehab, so if I am able to acquire one of these properties I would like to do the BRRRR strategy and my exit plan would be to refinance it. Is it possible to use the equity in the house after repairs towards the down payment on the refinancing mortgage, so in other words I do not have to come out of pocket for this? I would also appreciate any advise on potential lenders in ESSEX county. Thanks in advance.

[Alex V.]

Hi @Julian Perez yes you can. You just touched on the concept of forced appreciation, or sweat equity. If the repairs you make to a home add more value than they cost, then yes, that extra value will get counted towards the equity on a refinance. I wrote a blog post that dives deep into the numbers behind the strategy if you're interested:

https://www.biggerpockets.com/blogs/10165/68698-brrrr-math