BRRRR strategy question

[Jordan Leu]

Hi BP - I'm a newbie investor in real estate and trying to better understand the BRRRR strategy. I watched this video from Bigger Pocket's newbie guide to BRRR investing: https://www.youtube.com/watch?v=FBci62dfqaY&t=796

General questions about BRRRR:

1. Do you have to use a private lender or org to initially borrow money? What happens if I have the capital to purchase the property using cash (for lower priced properties of course), or would this be a bad decision? 

2. Is there a reason why (or why not) go to a bank for the initial loan to purchase the home vs. using a private lender? 

Thanks,
Jordan

[David M.]

@Jordan Leu

To be able to refinance and get your capital out, the method works best if you can “force appreciation” by fixing it up. It’s basically like a flip, except you hold it. So, the properties in the worse condition won’t qualify for conforming loans which require. “functional” house. Private money or hard money loans allow for buying properties in almost any condition, similar to cash.