BRRRR Logic Verification

[Jeremy Paschedag]

Can you tell me if I'm understanding BRRRR?

I have a SFR that I have had for 4 years with a 15yr mortgage with a tenant that I bought for 100k. Some reno's have been done. Payoff is 60k. If I cashout refi for at 80%, I'd need to put down 12k, plus say 2k for closing costs. Leaving me with about 26k to put down on a new property with and adjustable arm for 5 years. Make some reno's. After about a year, cashout refi for a 30 yr mortgage and repeat.

[John Leavelle]

@Jeremy Paschedag

Unless you have already been approved for 80% LTV by a lender I would not plan on getting that percentage. From what I have seen most people on BP have been getting a 75% LTV ratio for refinancing a rental property. And remember that is based on the banks appraisal. You definitely need to talk to some lenders to get their opinions.

What condition is your property in currently?  That will have an effect on the appraisal.  You need to get some good comps to narrow down your estimate on the Market Value.  Let's be conservative for now and use $128,500 for Market Value.  That would mean a loan of $96,375.

$96,375 - $60,000 (current loan balance) = $36,375 (not including closing costs).

This is a ruff estimate (I am not a expert)

No matter what.  If you can improve your Cash Flow by $200, then the refi is definitely worth it.  You will probably not get as much cash as you think you will.  Unless the appraisal comes back closer to the $153K. We hope.

You still might look into the HELOC. Even if you don't use it for your next purchase it can come in handy when you need cash. It works just like a credit card.

Hope this helps.