Modeling the refinance at last year's rate cost me 31k of trapped capital

In low price point rural markets the coverage test bites earlier and harder than this. My taxes are tiny but insurance has climbed a lot, and on a 90k house the fixed costs don't scale down the way the rent does. I've had a lender size me to 62 percent of value on a property that appraised exactly where I said it would.

Doesn't change your lesson, ledger, it just means the coverage ceiling is the binding one more often than people expect, not the exception.

Reading this from the outside, the part I find interesting is that you did the hard work well. Bought right, rehab close to budget, appraisal nearly on the number. And the outcome still turned on a term sheet line and a rate quote you didn't refresh.

Makes me think the skill in BRRRR isn't the renovation at all.

I'd push on one thing here. You said rent is 2,100. Was that the market rent on the appraiser's schedule or the rent you actually signed? Because if you leased at 2,100 and the appraiser's schedule said 1,950, some lenders will use 1,950 and your coverage was going to fail regardless of the rate.

I've seen the opposite too, a schedule higher than the signed lease, and the borrower got a bigger loan than the property actually supports. Which is not a gift.

arbor, I'd say the skill is the renovation and the term sheet, and most operators are good at one. ledger clearly is.

The pre-spending part is what I'd flag hardest for anyone earlier than us. I had two deals stacked and lost the second the same way, and losing a deal you'd already found is worse than the 31k because the 31k is still yours, it's just in the wall. What I do now is treat the cash-out number as a range with the low end being zero, and I don't put an offer on the next thing until money is in the account.

Slow question, since I'm still deciding whether I want to be anywhere near this strategy. If the coverage ceiling can bind below the value ceiling, and rates move between underwriting and refinancing, then the capital recovery step is genuinely uncertain on every deal, not just the marginal ones.

So how do people plan a repeat cycle at all? Do you just assume some fraction stays trapped each time and accept that the third deal is funded by something other than the first one?