Brand New: BRRRR- Insight?

Question

Hey All!

I am brand new here and just starting the book BRRRR. I'm intrigued of course and a bit overwhelmed. I loved the concept but am already nervous about making the leap. Buying all cash would for sure push my timeline back a bit but willing to if it is the best in the end!

Any success or cautionary tales? What are good markets to look into and how much capital really do I need liquid for the purchase and reno!? I'm very very fresh to the entire concept and grateful for any insight. Thanks!

Kristin Feerst · Answer

@Alyssa Wells just saw you live in Loveland.  I went to CSU and loved life in Fort Collins.  My parents are in Parker, CO.  I miss Colorado like crazy, just spent last weekend skiing here in New Jersey and it is not the same!!! lol

Alyssa Wells · Answer

@Kristin Feerst

Thank you so much! I'm still in the first half of the book but when he talks about buying straight out with CASH I was a bit intimidated. I appreciate your insight! I'm sure I'll learn quite a bit on my first deal.

I'm also a Ram!!! What a small world. No place quite like Colorado for sure- especially on the slopes. I hope you had a wonderful NYE!

Kristin Feerst · Answer

Hi Alyssa and welcome!

I did my first BRRR, which was a gut rehab in Philly, this year and am happy to lend my insights.  You don't need to use all your money to buy cash.  Using leverage wisely is key.  I did a HML and as a first time buyer they required 20% down on the purchase+rehab.

I'd say you need to have at least $25-30k in the bank to get started, minimum.

Keep in mind for a HML you usually have to front the money for construction costs and get the money back after each draw, so you need to manage cash well and time draws wisely.  Also, a lot of contractors require cash so I wouldn't rely on credit cards to float the money for construction.  There is such a thing as a bridge loan to cover construction, but I think that is too risky.  That said everyone has there own risk tolerance.

Definitely plan for contingencies to the tune of 10-15% over your initial rehab estimate.

Cheers to 2021 and good luck.