What to do with a pile of money

[Michael Malmrose]

Hello gang,

I've been a BP member for about three weeks now, and after much thought, I'd like to use the BRRRR strategy for financial freedom. Here's the lowdown...

-After refinancing, I will have about $200k to start.

-I live in the Salt Lake City area where the median home price is about $440K, and homes in "undesirable areas" are upwards of $260K. Anything less is typically a condo, a prefab, or a four hour drive to a remote area.

-I'd like to work this area, but with BRRRR, I'm not sure this makes financial sense.

A couple of questions...

-Is there a way to make this work in my area?

-Do I dare buy my first experience out of state? Like Alabama?

-Maybe try a fix and flip first?

-Any recommendations?

Thank you!

Mike

[Forest Skufca]

@Michael Malmrose First, welcome to BP and congrats on taking your first steps to gain financial freedom!

I've read a few comments mentioning Turnkey as a viable option. And, they are right, but I want to help you understand why. For the BRRRR method to really work, the property still has to cash flow. Let's take your "undesirable areas" for instance. At a buy-in of $260k, you would still need to rent it out as close to $2600/month as possible. And that doesn't include your real cost if there are repairs needed on those properties.

In most cases, a lender will want to see that the property will rent out successfully for up to 6-months before they agree to refi. So, if there's any kind of renovation needed you could potentially be in the property for up to a year before being able to pull your capital out and start again.

Additionally, the kind of tenant you acquire in those undesirable areas won't likely take care of the property, or pay on time, or even pay at all.

I imagine the likelihood of renting out homes in the nicer neighborhoods at $4k/month is pretty unlikely, which makes your ability to cash flow positively even more difficult and pretty well rules out those neighborhoods.

With a turnkey solution, you have the option to invest out of state in growing and thriving markets. If you were to finance the purchase you could use $200k to invest in 4-5 properties in different markets thereby diversifying your portfolio and generating $1600+/month in truly passive income at leveraged cash on cash returns above 12% and higher.

It all comes down to your true goals and what's most important to you - your time or your money. That's the difference between an active investor and a passive investor.

So, to answer a couple of your questions directly:

• I don't think it would be easy to make this work in your market with the information you've provided
• You could absolutely invest out of state IF you partner with a great Turnkey provider.

At the end of the day, you have several options. But, the main goal is financial freedom. That said - it's important to invest in strategies that truly help you achieve that.

Please don't hesitate to ask other questions! I'm always happy to help!