BRRRR vs Traditional

[Eric Kulling]

I'm starting to understand why BRRRR is so valuable however I am confused on why you can't borrow against you investment the same way in a "traditional" investment as you would the BRRRR method. For example: traditonal method - if you put 20k down on a 100k house, fix it up (put in another $30k) and refinance for $150k, then are you limited to a certain amount of the $150k you can out?

BRRRR method you will have to buy the house out right for $100k put another $30k to rehab (in for $130k) and refinance for $150k and you are allowed to take out 70% of the 130k you have in it, allowing you to put that money into another property?

I guess the disconnect is why can’t you do the same with the traditional method. Is it because the bank won’t give you the loan in the first example vs the second?

Does any of this make sense? Haha

[Kenneth Garrett]

@Eric Kulling

By buying the property outright you have many advantages.  

• Buy distressed property at a discount 
• The rehab forces the equity
• Property does not qualify for FHA financing or in some cases conventional
• By forcing the equity through the rehab you can pull your money out. No money left in the project. Your ROI or CoC is infinite.
• Tenant pays for your mortgage and and all other expenses.  It produces cash flow.
• This process is repeatable and can produce financial independence for you.
• Good Luck.