BRRRR Strategy for Condo Rentals?

[Jonathan Darling]

Hello Everyone,

My name is Jon and I'm a new member here on the Bigger Pockets forums and a newbie to real estate investing in general. I've watched all the Youtube videos, listened to all the podcasts, and read all the blog posts about the BRRRR strategy I could find but I haven't seen anything that covers how this strategy might be applied to buying and renting condo units. Does anyone have any experience doing this? In my area single family home rentals isn't quite as common as apartment or condo rentals so I was thinking about starting off in real estate investing by trying to us the BRRRR strategy to buy and rent condos. Has anyone here on the forums done this before?

[Kyle Mccaw]

You need to really watch out for condo fees. They can eat up profit quickly. The big difference is you give up some control so you need to be careful who else has power over your property. Be sure the community is friendly toward rental units. I have had my but burned after buying a condo that the hoa was taking over by a single investor that owned 90% of the complex. He/HOA voted a large assessment against all the properties to upgrade the property. He happen to own the construction company that was awarded the project. Needless to say my profit got blown fast. I say this to make you aware that when you buy into a condo you need to be aware of all the risk.

[Jonathan Darling]

Unfortunately, many of the single-family homes where I live also have HOAs so an HOA fee is unavoidable. In a subdivision I used to live in, the HOA made a neighbor of mine tear up a new stone driveway he had put in because those types of exterior alternations where not allowed by the HOA. I think I just have to accept that no matter which type of property I buy I'm going to have a meddling HOA to deal with. I think because of their lower prices a condo might be a good way for me to start out. But does anyone have experience refinancing a condo to get their investment back out?

[Kurt K.]

Hey Jon, 

I'm in the same boat with the same mindset as you. My plan is to also start with condos/apartments in the downtown Chicago area and refinance to acquire more assets. From what I've learned, its a great way to get your foot in the door with REI and can be much easier to begin with. Unfortunately, HOAs and their associated fees are unavoidable here in Chicago. I'd love to stay in touch and share experiences as we both go for this strategy.

Goodluck!

[Nick Patterson]

With condos I can see that it will be very hard as the forced appreciation for the BRRRR is so tight.

With a 6 unit building, raising rents by $100 a unit equals $600 

With just one unit, I can't see how its possible unless you get the property for 60% below market at acquisition. 

[Jonathan Darling]

Hello Nick,

It will probably be hard to get the ARV up to where I would need it to be to pull back out my initial investment but unfortunately I can't afford to buy a 6 unit building. I might be able to afford one unit though. I might not get everything back out of the deal after I refinance but I think I can get at least get three quarters of it back out and that's a decent start I think.

[Jonathan Darling]

Definitely Kurt let me know if you have any success I would love to check in with you in the future to see how things go.

[Anna Gorres]

Jonathan & Kurt,

I am thinking of doing the same thing for the same reasons. Do you have any updated info to share?

[Joe A.]

@Jonathan Darling @Anna Gorres @Kurt K.

Any luck with BRRRR'ing a condo? I've been told that you can't always cash-out refi condos due to make-up/dynamics of the condo complex (owner-renter ratio, etc).

I figure you could always sell if the refi doesn’t work out...

[Joe White]

Here is a table I made weighing the Pros & Cons. The main hurdle is that many lenders won't loan on condo building units. It makes it less expensive to buy; but hard to do a refi and very hard to sell as you would need a cash-like buyer.

Pros	Cons
Inexpensive To Purchase	Cost of Condo Fee
No Competition - Easy to Find - Low Cost of Acquisition	Condo Fee Can Go Up & Special Assessments
Higher Quality Tenants - Best Time Value of $	Communities Might Restrict Rentals
Low Cap Ex	Hard to Refi
Closer - Far Less Travel Time	Hard to ReSell - If a Buyer Can’t Get a Loan