BRRRR Case Study - Need Help with the Refinance Portion

[Chris Mylan]

Hi BP Community,

I have a question about the BRRRR strategy that many investors are now using to build their portfolio. Specifically, I have a few questions on the refinance portion of the strategy. Broadly, what are the mechanics that make this work?

A little about my opportunity – in March I purchased a 3b, 2b single family in the Pittsburgh, PA area (let’s say for $140,000, 20 percent down) that I refurbished (let’s say for $10,000) and now rent out to college students. Everything is going great - nice cash flow, very few issues, but now I am looking to refinance and repeat.

Can someone please painstakingly walk me through what would need to happen to get the cash out refinance?

I do not understand the mechanisms of going to another bank (I know, only a select few banks will do this anyway under a year) asking them to appraise the house at $175,000 ARV, for example, and getting a cash out refinance, which I assume is the $28,000 in equity I originally put in.

One issue I cannot get my head around is the property “conveniently” appraised at $140k at closing. How do I have another bank come in and say – “Wow, this person put work into this place and the comps are $180k for similar houses/ finishes. We’ll appraise him at $175k.”

I was hoping someone could expand on the example above or provide a case study where this strategy has worked for them.

Any and all advice or links to posts that already covered this are much appreciated.

Thanks BP community! You guys are the best.

[Brent Coombs]

@Anthony Angotti, "the closing costs associated with a new loan sometimes negate the benefit"? So you're saying that the cost of Refi "R" - often "negates the benefit"?

There are a LOT of folk who like the concept of BRRRR - but who don't want to (or can't) use their own home as security. So, they MUST rely on new refi loans, which is why each deal MUST have the "higher equity" upside within it (to also cover those fees) - from day one. Cheers...