Question about the refinance part of the brrrr strategy

[Jonathan Puerta]

I'm not sure if I'm understanding why people refinance in the brrrr strategy. It seems to me that if I refinance I'll get cash but I'll lose my cashflow. Say my mortgage is 1000 I rent it for 1500 I'm cash flowing 500. Now if I refinance I'll able to pull cash out but then my new mortgage would increase, potentially wiping out my cashflow... can someone please elaborate when and why this would be beneficial. Thank you

[Milton Rivera]

@Jonathan Puerta

The benefits of refinancing include:  

1. You can cash out and re-use those funds to acquire additional property.  

1. The BRRR strategy assumes you either used hard money or cash to initially acquire and repair the property. Hard money loans tend to have much higher interest rates and by refinancing it via a more traditional lender those rates would be significantly lower, therefore, lowering your monthly mortgage payment. If you paid cash, you would, in theory, get all or most of your cashback accelerating your money return.

Hopefully, that clarifies it for you. 

Good luck,