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Updated about 9 years ago,

User Stats

89
Posts
21
Votes
Matt Powell
  • Catonsville, MD
21
Votes |
89
Posts

BRRRR Strategy - I don't get it.. what am I missing?

Matt Powell
  • Catonsville, MD
Posted

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.

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