I forgot the first step of BRRRR

[Daniel Kramer]

Are there any other newbies out there who have listened to hundreds and hundreds of podcasts but completely missed the first step of BRRRR... BUY?

My wife and I just closed on our first rental property, with great plans to renovate and refinance. But we bought it with a conventional mortgage. It wasn't until listening to podcast 327 where the process is really well outlined as a lead-in to David's new book where it really clicked with me that the BUY should really be CASH. It could be someone else's cash, a HELOC from your primary house, a personal loan from your 401k, or even hard money... but NOT a conventional mortgage. How did I miss this??? The day this clicked for me was like the day I found the real estate Jesus. I am born again. Here me out:

1) You get the good deals. The auctions, the off-market postcard/bandit sign leads, the wholesales. The best deals come when you can offer something else in exchange for total price... the convenience of cash. 

2) You don't show your hand to the lender. You don't come to them until AFTER you have the asset, which is fully renovated and sparkling, and you get the place appraised. If you get the place appraised before the renovation as part of your initial loan, they have some bias toward the value of the place. 

3) You get to refinance quicker. You are out that cash for your renovation time but that's really about it because it won't be long before you have your cash-out refinance check in hand. If you first bought with a conventional mortgage, you might be sitting on that seasoning period for a year or two. And you STILL had to pay probably 20-25% down for an investment property. Plus closing. 

4) Speaking of closing, you only pay for one closing. You might have some attorney and title fees for your cash purchase, but not nearly as much as you would have through a bank loan. Closing money is straight down the drain, you don't want to do it twice on one property in a matter of 1-2 years.