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Updated about 9 years ago,
BRRRR Strategy - I don't get it.. what am I missing?
Listening to @Brandon Turner's webinar on BRRRR, and his first example looks like this:
- Buy house for $70,000
- Rehab: $30,000
- Closing costs: $2,500
- Total cost: $102,500
- Appraised after rehab for $141,000
- Refinance: 80% ($112,800)
So, I think Brandon would still be in the hole after the refinance. Check my logic and figure out what I'm missing:
He's $102,500 in the hole after the rehab. Then he refinances, and has to put 20% down on the $141,000, which is another $28,200. So now he's $130,700 in the hole (102,500 + 28,200). The bank gives him a loan for $112,800, which isn't enough to cover his entire debt; it leaves him $17,900 in the hole (130,700 - 112,800)! Sure, he has 20% equity in the property, which is worth $28,200, but that's not tangible money. What if he borrowed everything and owes people money yesterday?
I don't see the benefit, and I must be missing something. Why not just buy a property already rehabbed at $141,000, put your 20% down, and not owe anybody $17,900? Somebody help a newbie out! Thanks.