BRRRR (Refinance and Repeat ??)

[Kim Ran]

Hi,

I think I've must have gotten myself a bit confused. Okay, so when doing a BRRR, I'm sort of stuck on the refinancing and repeating part. Say I purchase a property by putting 20% down payment on a loan. I rehab it and rent it out. Now, I refinance it at 75% of my new and highly appraised home value. What happens next? With this new Refi cash out value loan, do I pay off the original loan I took out? If so, Say I pay off the original loan and I make back the money I put in the deal originally. I keep hearing now you 'repeat'. But how do I repeat in the sense that I feel like this refinance value is technically a loan, right? How would I reinvest this refi cash out money if it's a loan?aghhhh,I'm so confused on this part. Is it free money?! Please help 🙏😢😭😫

[Brandon Baker]

Kim, I focus on BRRRRs as well. 

The entire point of a BRRRR is to pull all of your money, if possible, out of the deal to leverage it for the next opportunity.

Here’s an example:

1. I pay 65K cash for a property (Buy), put 40K cash into rehab (rehab), the property is now worth 145K so I get a loan (refinance) for 105K which refunds all my cash investment. I now move on to the next property (repeat). 

2. If you are using a loan to purchase the property, it is still doable but more difficult. You just have to account for the loan expenses to make sure the deal works.