@John Green
It’s because taking a loan isn’t a taxable event, so there’s no taxes on the “cash out” part of the loan; it’s still part of the loan but you can use the cash towards your next brrrr acquisition, and you’ve got one of the lowest interest rates on your new capital infusion. The refinance gets you a lower interest rate than hard money or credit cards on the debt payoff, and a low interest rate on the capital infusion (cash out). You can’t borrow capital at that rate unless it’s secured by something of greater value; ie, the property gets you access to low cost capital. You need constant capital to invest in real estate, and the brrrr method speeds up the availability of capital and does so at a low rate of interest. Meanwhile your brrrr properties mortgages are being paid down by your tenants, and over the long haul your property value is appreciating, all while the property provides cash flow with tax breaks. In brrrr you get 1) mortgage pay down from rents, 2) property value appreciation, 3) cash flow from rents, 4) “depreciation” tax deductions, 5) “loan interest” tax deductions, 6) low tax rates on the remaining “passive income”, and using the property value as leverage you get access to low cost capital to help secure your next acquisition. Where else can you get this combination of benefits?
