You know BRRR is dead, when...

[Chris Mason]

Markets find equilibrium. Supply and demand. If something is overly-hyped, that represents a demand increase. So, holding constant supply, that means the price will go up.

Remember that idiot uncle/cousin/fiancé/whatever growing up, at the holiday dinner, who always said that "if you want to get a good deal on a house, buy a foreclosure"? Or, "the key to getting a good deal is to lowball, to leave room for negotiation"? Or other such gibberish, like "the way you get a good deal on a car is to go to the dealership right before the end of the month, to catch them when they need to hit a quota"? (Hint hint: car dealerships stopped measuring for quotas/bonuses/etc at the day that is the end of the calendar month like 20 years ago, or otherwise found another way to measure...)

The fact that even THEY knew about that "hack," is what told you that word was out, it was no longer niche or insider information, and thus it was no longer necessarily a guaranteed recipe for success. Supply and demand. Now that every rando out there was looking to "get a good deal by buying a foreclosure," suddenly the prices on those property types went up, and it was no longer a magical recipe for success. Realtors still have to constantly deal with FTHB that think they've found a way to "beat the system" thanks to their uncle's "words of wisdom" 15 years ago.

That doesn't mean you "couldn't" or "can't" pull that off, just that it's no more or less likely than any other ho-hum vanilla standard strategy. Because it IS a ho-hum vanilla standard strategy. 

So, with that context. Here I am taking my boring-as-silt annual continuing education to maintain my mortgage license (and found an excuse to be diverted from this boring stuff to post this thread :P ). Guess what my idiot uncle put on the final exam? 

Yyyyyyyyup. Here you are:

My thread title was a bit dramatic. The mortgage continuing education exam in front of me is not as ubiquitous as everyone's stupid uncle. But it'll be there soon enough. It's been iffy for some time, it's not dead, but it's in a coma, the family is asking for the plug to be pulled.

"House hacking" isn't dead, but the goalposts have been moved. Once upon a time it meant buy a 2-4 unit with 3.5% down FHA, and the other units would fully cover the PITI - that "orthodox" or "fundamentalist" or "original meaning" approach is mostly dead (markets find equilibrium, supply and demand). Then it became "partially offset" the PITI. Then it became "hey it won't be as bad," and now it's devolved into "have roommates" - as if "have roomates" is a "hack" (literally, the pilgrims did it, I did it in the Marines without using any particular buzz-word, and every 19 year old college student knows the trick... some hack).

None of this means it's not worth trying, just a reminder that as something moves from "niche" into "mainstream," that means demand for that thing, whatever it is, is going up, so eventually it's not actually any more or less likely to produce a particularly phenomenal outcome than any other mainstream approach. You can still knock it out of the park, it's just not particularly likely or unlikely, relative to everything else that everyone knows about.

So what's next? :P

[Scott E.]

Great post. And this applies to many industries other than just real estate. In this more modern world that we live in, it's becoming increasingly more challenging to create opportunities in business. People are more connected. Free education is everywhere. Wanna-be-entrepreneurs are a dime a dozen.

Whether you are looking to

-Invest in real estate

-Open a bar or a restaurant

-Open a service shop (hair salon, barber shop, mechanic, jeweler, dry cleaner, etc)

-Start an online business (amazon FBA, dropshipping, content creator, education, etc)

-Build a car rental fleet

-Become a real estate agent

-Build a landscaping route

-Build a pool cleaning route

-Start a vending machine business

-Invent a new product (i.e. shark tank)

-Etc etc etc

All of these pursuits can still be profitable, but there is just more competition than ever before due to the exposure and all of the relatively simple business models being exposed online.

Real estate has fit into the bucket with all of these "simple" business models because investing in real estate is a very basic, simple concept to wrap your head around. Buy property in a good location, wait some time, sell for a profit. Or never sell and collect the cash flow forever.

Times like today though are another story. Investing in real estate needs to be done with caution. And those that are jumping in to hop on some bandwagon, will be more likely to be burned in a sketchy market.