Logic behind refinancing?

[Jacob Trimble]

Hello,

I currently own a rental property and am looking to buy another. My question is there is popular talk about the "BRRR" which I love the concept, I'm not trying to knock it at all. I am just confused at how the refinancing works because I've never done it. However, I have done some research and am a bit confused. The idea is to have cash flow and build equity in a home. If I buy a home for $65,000 and have a mortgage of $350/month plus expenses that add up to $1,000/month; then rent it for $1500 I now would have a positive cash-flow of $500. But then I refinance for $120,000 which would free up approximately $55,000 which is great, but then decrease my cash flow to only around $250/month after refinance. This would be the ideal situation in my mind but if my cash flow is only $250 a month to begin with I would then in theory loose all of my cash flow. So it's great I got to free up the extra cash but now I have a property in which it's not cash flowing or not nearly as much and I'm supposed to keep doing this? Obviously the numbers aren't perfect and I'm obviously missing something, so again I am not trying to knock this strategy at all I would just love more of an explanation as to how it's supposed to work. Hopefully I explained this question okay. As always love and appreciate all the advice!

Thanks,

Jake

[Jason D.]

@Jacob Trimble so the idea behind the BRRRR is that, ideally, your own cash invested is zero. So while your cash flow may be reduced from $500 to $250, would you rather invest $55,000 to make $500/mo or make $250/mo without investing a dime?