Everyting hinges on knowing the value. Am I wrong?

[Jerry Ellis]

I decided a while back that I want to supplement my income and retirement with rentals. I've set some goals and have been working on the details of the landlording and am working on a business plan but I'm hazy on one aspect.

I'm aware of the BRRRR strategy for buy and holds. Buy, rehab, rent, and refinance pulling your money back out so that you can repeat. It seems simple right?

I'm on MLS and craig's list pretty much every day and have been analyzing all sorts of properties. Most pencil out to $100 to $150 per door with 10% for vac, maint, & capex, etc. If I buy any of these properties I've analyzed, I feel like they'll cash flow but then I'll have to save up for another down payment for the next one and that'll take a while.

I've been looking at single family and multifamily up to about 6 units. I've yet to come across a property I'd consider undervalued in price or rents that I could apply the BRRRR strategy to. At least, nothing obvious. As a consumer, my process is usually to educate myself on all the aspects of the thing I want to buy so I know a good deal when it pops up and I would assume it's the same when it comes to real estate.

I hear of people going from 0 to 10+ properties in a short time. So how are they going from uneducated to recognizing and securing these deals? Is it that they are putting in a crap-ton of low offers that the occasional seller accepts that leaves room for a cash out refi?

[John Leavelle]

Howdy @Jerry Ellis

From my perspective the idea BRRRR property is distressed and can be purchased at a significant discount. The reason is my all-in costs must not exceed 70% of my estimated ARV. Those costs must include purchase price, Rehab costs, Closing and Holding costs. When I get the Cash-out Refinance loan it typically will be 70 - 80% LTV based on the Lenders appraisal. If I keep my all-in cost to 70% or below I should get 100% of my cash back.

If you purchase properties close to List price or Market Value the chances of getting 100% cash out is slim.

As far as going from 0 to 10 properties in a short time depends on a lot of variables.  Most importantly is how much capital to start with.  For me I am more interested in Cash Flow more than the number of properties.

Hope this helps.