How Cash-Out Refinances Work on Rentals (BRRRR Case Study)

In real estate investing, the BRRRR strategy is a powerful tool for building wealth. Here’s a BRRRR case study on one of my rentals. You’ll see how this strategy can be applied, showcasing the potential for significant equity growth and cash flow generation.

What is BRRRR?

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It’s a cyclical process where you:

1. Buy an undervalued property.
2. Rehab the property to increase its value.
3. Rent out the property to generate income.
4. Refinance the property to take cash out based on the increased value.
5. Repeat the process with the withdrawn cash to acquire more properties.

See my full BRRRR guide here: How to use the BRRRR Method to Buy Rentals With Less Money

You can also use my BRRRR calculator.

The Case Study

I’m a real estate investor with years of experience with the BRRRR strategy. I’ll show how I used it on a property I bought back in 2012. Here’s a breakdown of the journey:

• Buying at a Discount: I purchased the property for $109,000, securing a good deal through a short sale.
• Rehabilitation: Minor repairs and cosmetic upgrades were done for around $12,000.
• Renting for Cash Flow: The property was rented out for $1,300 per month.
• Cash-Out Refinance: Two years later, after property values appreciated, I refinanced the property at $143,500. This allowed me to recoup his initial investment and repairs, along with an additional $17,000.
• The Results: Today, the property is estimated to be worth $415,000. I enjoy a positive cash flow even after factoring in property management and enjoy significant equity in the property.

Video of BRRRR Case Study

Key Takeaways

• Buying below market value creates instant equity.
• Refinancing can be a powerful tool to access capital for further investment.
• BRRRR allows you to build wealth through both cash flow and equity appreciation.

Important Considerations

• Not all properties are suitable for BRRRR. Careful analysis is crucial.
• Market conditions can impact the success of the strategy.
• Refinancing involves additional costs and considerations.

Conclusion

The BRRRR strategy, as demonstrated in this case study, can be a successful approach to real estate investing. By strategically acquiring properties, making improvements, and leveraging refinancing, investors can build wealth and achieve financial freedom.

Are you interested in learning more about the BRRRR strategy and how it can benefit you?

Here are some great resources: