Thinking through the logistics of BRRRR

[Pat Dansdill]

Hello all,

I would like to use the BRRRR strategy on a property, but don't fully understand the details-any help is appreciated!

1-Am I wrong in assuming you can buy a physically distressed property with only the down payment in cash, and then finance the rest with a lender?

2-Following the above scenario: If you are able to finance the remaining amount with a lender, and then refinance the property after you rehab/rent it out, there lies the possibility of losing on interest points, right?

For example-if I bought a property today, with a down payment, and financed the rest with a 5% interest rate, then refinanced in 6 months (after I rehabbed, rented it out, and it was appraised for a higher amount) when the interest has been potentially raised to 5.25%, I lose out on a lot of money with the higher interest rates...correct?

I'm not sure if there's more I need to learn, or if that is simply part of what happens in a BRRRR deal, and it's better than the alternative of doing nothing.

Thanks,
Pat Dansdill