I have 200k to invest

[Kenny Oliver]

Hello everyone my first post here! I have been doing a lot of research on real estate investing reading books, podcasts and of course bigger pockets! multi family properties is something I want to focus on. I have made a nice amount of money in music production and currently have 200k just sitting in my bank account ready to be worked. I live in the suburbs of Southern California but as most of you know it's one of the most expensive states in the country. Investing out of state is very enticing since it is way cheaper to find a fourplex for half the price I would find here in California. I don't plan on using all my money on one property. But I'd like to know how I can use my 200k to get 2 fourplexes or 1 fourplex and 1 duplex. Could I just put 2 down payments and let the units pay them selves out? Are there any investors out there that can give me any advice on how to go about this and any cities/areas you recommend I look into? Thanks a lot!!

[Joseph Hennis]

@Kenny Oliver BRRRR. In fact, I can show you how to buy 100 fourplexes with 200k cash with BRRR. Here it is. Buy a fourplex cash. Renovate the fourplex. Rent out the fourplex. Refinance the fourplex. Repeat times 100. Done.

Of course. Nothing is that simple, but that's the strategy. Let's talk a little about the different phases. Buy: Here is the rule of thumb; buy a property at 70% ARV (After repair value). This can be done several ways. Occasionally, you may find MLS properties (or other retail websites) listed at 70% ARV, though they are generally listed higher and you need to negotiate the price down. Other sources could be pocket listings, wholesalers, REOs, etc. Too many to list. Now the 70% ARV rule of thumb is just a number to get you in the door, if it's close to that start looking deeper. Figure out the actual costs to repair and see if it matches your 70% ARV figure. Also, you need to be able to figure out what the ARV is. Make friends with some realtors and ask for a BPO (broker price opinion), use zillow, and even better, go to realtor.com and click Sold, then look for duplicate properties in the same area, same sq ft, etc, that recently sold. This is really the most important phase. There is an old saying "You make money when you buy, not when you sell." Way more can be said about this phase... but this is the jist of it.

Repair: Make repairs that lowers your maintenance costs and raises rents.

Rent: So again, here is a rule of thumb, and you should be looking at this rule of thumb during the buy phase. Rule of thumb: Rent should be at least 1% per month of purchase price. But here we need to modify it a bit: Rent should be at least 1% of planned refinanced amount. If you are planning to refinance at 80% LTV then that amount is 80% of ARV. Also this is just a rule of thumb to get ya in the door. You should carefully examine the numbers for cash flow. Numbers to include: management fees, Cap Ex, repairs, debt service. Does it have laundry machines? Is owner paying water customary in the area? Tax rate in the area (this can be wildly different in some states, counties, and cities)?

Refinance: So consider your cash flow before going too high on LTV, but remember after you refinance and buy another property with the capital, you can use that property's rent money to help cover the previous property's debt service too. The idea here is to pull out what you put in, recovering your capital. The reason why this is even possible is the value added by the renovations. Also, consider seasoning requirements. Most banks make you wait 6 months to refinance, though I hear there are banks who are investor friendly that can wave this requirement.

Repeat.

It seems complicated and honestly we could talk for hours about each one of these subjects, but the concept is really quite simple. Here's an example to give you an idea of how it works.

Buy a property at 100k that the ARV is 250k. Make 100k in repairs. Rent it out. After repair rent is 2k/mo. That's 1% of the 200k loan. Refinance at 80% LTV, 200k loan on 250k value property. Now you have your money back and can do it again.

There are deals out there better than this one, but there are far, far more that are worse than this one. Just run your numbers and find an investment that works for your goals.