Refinancing

We were tilting into the loosey-goosey, easy lending environment.

In the 90s, it was popular to buy an undervalued property, renovate it, raise the rent, and refinance it based on the improved value.

That process later got a buzzy acronym and became known as the BRRRR strategy, Buy, Rehab, Rent, Refinance, Repeat.

By 2005, financing got more creative.

This is when I was a new real estate investor.

Buy at a genuine discount, add value, refinance at 75% of the new value, and you can pull most or all of your original cash back out, which is the entire mechanism behind compounding a portfolio without needing fresh capital every time.

Buy at full price, and there's no uplift to refinance against.

One way, though not the only way to add value, is through the buy, refurbish, refinance model, and we have a fantastic episode on this featuring Kevin Wright called, well, How to Buy, Refurbish and Refinance.

So there are three parts to a project.

There's the end value, there's the cost of getting it to that end value, which is solving whatever the problem is, and there's the price you buy it.