Can you do a half brrrr?

[Kathleen McCabe]

Hi BP fam!

I’m a new investor, and I’m wondering if it’s possible / worth it to do a “half” brrrr. Im David Greene’s book, he is pretty insistent on saving enough money to do your first brrrr in all cash in order refi and get your nest egg back. I have about 40k saved, which is not enough to do a full brrrr in my area (Dallas). What if I did the following: traditional financing for my down payment , so 25k down on a 100k home that just needs cosmetic fixes (smaller rehab) for 15 grand.... and I boost the property value maybe to $125. Can I refi the money I put into it out of it (40k)?

Again, this is just a simplified example, of course. I’m trying to get into the game quickly, but should I wait to do a brrrr when I have all the cash?

Yes, I’m open to using hard money, just a bit nervous because I’ve never done full rehab before, figured this could be the more conservative option on a first investment.

Looking forward to hearing your replies! Thanks in advance.

-Katie

[Bart H.]

Originally posted by @Kathleen McCabe:

Hi BP fam!

I’m a new investor, and I’m wondering if it’s possible / worth it to do a “half” brrrr. Im David Greene’s book, he is pretty insistent on saving enough money to do your first brrrr in all cash in order refi and get your nest egg back. I have about 40k saved, which is not enough to do a full brrrr in my area (Dallas). What if I did the following: traditional financing for my down payment , so 25k down on a 100k home that just needs cosmetic fixes (smaller rehab) for 15 grand.... and I boost the property value maybe to $125. Can I refi the money I put into it out of it (40k)?

Again, this is just a simplified example, of course. I’m trying to get into the game quickly, but should I wait to do a brrrr when I have all the cash?

Yes, I’m open to using hard money, just a bit nervous because I’ve never done full rehab before, figured this could be the more conservative option on a first investment.

Looking forward to hearing your replies! Thanks in advance.

-Katie

 On a first investment, unless you have really deep pockets, or have experience in construction (or something similar), I would NOT do a large rehab. 

The problem is your first rehab will cost you 2-3x's what you expected, and it will take you twice as long.  Imo on your first deal, just hit a single, get something essentially turnkey ready.  At most do some painting, maybe refinish the floors, change out the locks and call it a day.

The first investment really is like your learners permit.  ITs the property where you learn how to find tenants, how you will handle calls, what contract you will use, etc etc.

Use later properties to learn the rehab business.

Because honestly your biggest risk on your first property is that you begin a full guy job rehab and you run out of cash halfway thru and end up having a house that you cant rent and dont have the money to finish.  

Honestly, we have been investing in the Dallas area for a few years now, and lately, most of what I see being listed as "wholesale properties" are essentially being listed for retail prices, there is little to no margin for the person doing rehab. At that point you are better off going with a turnkey property/retail property to start off with.

Lastly for a conventional loan it used to be 6 months between the initial loan and refinancing your BRRRR. I do think its wise to stay away from hard money until you feel really comfortable with estimating rehab costs, and ARV's.

Best of luck to you, let me know if where is something I can do to help.  I know a few of the neighborhoods in Dallas if you would like to run a property by me, feel free.