BRRR’ing yourself to get jump started?

Question

Greetings everyone. I’m looking to transition into the world of REI and have been reading several books and still continuing to learn. I want to get this career jump started but I’m at the stage in my life where I am about to start a family and looking to get a house for my family first before diving into REI. With that put in perspective, I was wondering and had thought of the idea of BRRR’ing myself first so that when I’m ready to invest in rental properties, I’m not wasting much time after I purchase a home for my family.

On a high level, Thoughts on that if the money hypothetically will work?

Thanks guys

Tommy Adeoye · Answer

@Joel Arangorin

Hopefully the other half is well informed about your decision of embarking on this exciting journey. Like you,I am deep in the education phase. When you say BRRR'ing yourself, are you referring to the "Rehabbing" part?

If so, Rehabbing would definitely put money back in your pocket but may require more of your time equity.  If BRRRing is a strategy you are going to stick to for the longest,  it will be the perfect learning opportunity. You could also consider half and half, by that I mean , you take on half the project and your contract the other half. You may also hire a helper on craigslist and knock down the thing yourself and save a ton of money.

As far as the money working - this is where the BRRR calculator comes in. Try to research more about the "70%" rule, if this isn't something you are familiar with. Your profit is made when buying the property. Being a PRO member you have multiple calculation uses , you could calculate as much brrrr deals as you like.

I'm excited for you and one very important tip to leave you with, the more podcasts,webinars,posts, blogs you access on BP, the clearer the vision becomes. Enjoy the ride to financial freedom.

Joel Arangorin · Answer

Thanks @Evan Polaski

Evan Polaski · Answer

@Joel Arangorin, you want to find a fixer upper for yourself.  Yes, that is a great way to build equity and tap into it to start buying investment properties.  The same risks that come with any rehab are true with rehabbing your own house: you uncover something major and don't have the money to fix it.  It is a risk, but so is buying any real estate.

You can take two approaches here: buy the house and renovate while living elsewhere.  The issue here is you are covering the cost of two places at the same time, but you get to avoid living in a construction site.

OR, buy the house, move in, and start renovating.  The issue here is you live in a construction zone, but you are only paying for one place.

In general, the rougher the house to start, the better the deal you will get and likely the more equity you will create with the rehab.  In this market, in my area, anything that isn't a major rehab is selling so high that there is no real equity to be made, i.e. you will buy for say $100,000, put $50,000 in to make it nice, and have a $150,000 house.

Last note, most lenders require a year of seasoning before they will refi on the new value, before that you can refi but you will be at 80% loan to cost.  So be prepared to be on hold for a bit before you can really access that equity to use for other investments.

Joel Arangorin · Answer

@Andrew Syrios

It's house hacking to some extent, but the difference would be that it won't be a multi-family but a single family and won't be living there for just a year, but much longer than that.

I would only be BRRR'ing to myself/house hacking in order to take advantage and use the equity in order to start my first actual  BRRR project.

Andrew Syrios · Answer

Do you mean house hacking? (Living in the property you buy and rehab.) If so, sure, that's a great way to get started. FHA loans in particular are great as you can buy up to a fourplex with 96.5% financing and good terms. You just have to live in one unit for at least a year.

Joel Arangorin · Answer

Thanks for the feedback @Tommy Adeoye. I appreciate it. I guess I should’ve done a better job in providing perspective as to what I meant by BRRRing myself.What I meant by BRRRing myself was getting the property for myself instead of renting out to tenants - pretty much BRRRing “to myself”. Im aware that there wouldn’t hypothetically have cash flow. I was thinking the purpose in BRRRing to myself is so that I can quickly have capital on hand immediately to start actual REI after I have a home for my family. I was counting on the refinancing aspect of BRRR to accelerate my timeline in my REI career.

BRRR’ing yourself to get jump started?

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