BRRRR w/bulk cash Investment, OR Standard 20%/30yr mortgage?

[Adam W.]

Hi there,

I joined this site a few days ago, but I have been mulling my first real estate investment for a long time.  My friend and I have narrowed a single-family condo in a complex located in an area we are sure is to appreciate.  The current property we are looking at should be obtainable for $300k (has room for $10k in improvements), and after-repair valuation could sit as high as $320k.  But that's not my issue.

I am interested in weighing the basic pros and cons of BRRRR vs buying the condo via mortgage with 20% down ($62k for loan amount of $248,000):

Note this would just be the first property - my friend and I would like to then pursue multifamily units for subsequent purchases ASAP.

Why would it make more sense to use BRRRR?  In this case I would likely take $155k out of my own pocket (or borrow against the equity I have in my current home), and source a private investment at say, 5%.  I would then look to re-finance if possible in as little as 6-12mos.

• In this scenario my calculations show pre-refi/post CF at $1,216/$189, but cash-on-cash ROI is a paltry 4.7%/2.2%.

Why would it make more sense to use the rental option, where I put down $62k assuming 4.25% over 30yrs?

• In this scenario I am showing monthly CF at $238 and Cash-on-Cash ROI at 4.43%
• Also I may have overestimated HOA, when I drop it to a more appropriate number the C-on-C ROI goes up to 8%.

Even without using the above example of the property I am looking at, why, in general would you choose 1 option over the other if starting out with a first property?

Thanks,

Adam