Explain the Brrrr method

[Alvaro Rodriguez]

Can anyone describe a case where this method would work? I’m a little confused on the part where the refinancing happen. How do you calculate if you want to cash out some of the equity?

[Nicholas Lohr]

Buy a property for 200,000 with 25% down.  

25% down is 50,000.  And you have a loan of 150,000.

Put 70,000 into making it nice. 

You are now into the property for 50,000 + 70,000 = 120,000 cash into the property

Have it appraised 6 months later at 350,000. 

Banks will lend 70% of the new appraised value of 350,000 which is 245,000. 

You take the 245,000 and pay off the old loan of 150,000. so 245,000 - 150,000 = 95,000.

You take that excess 95,000 and put it towards your next down payment on a new property.

And even with that new loan of 245,000 you still cash flow from the rents. 

I left some closing costs and other fees out of this for simplicity but this is almost verbatim my first BRRRR deal.  Now I have 14 units.