BRRRR ("fix and rent") in Jacksonville area

[Eric P.]

I'm curious if BRRRR ("fix & rent") works in the Jax metro area. Essentially, the ability to have your purchase price + rehab costs less than 70% of the ARV, so after you rehab you can find tenants & then refinance to get all of your cash back. I'm sure there must be some areas / neighborhoods where this works? Of course, the other requirement is that the rental income is enough to cover your mortgage + expenses on the back-end. So this tends to work best in middle class neighborhoods.

Are there any licensed real estate brokers / agents who can help me find such properties? Not interested in Turnkey btw - I'd rather buy pre-renovation (not post-renovation) to capture the equity myself.

[Sarah Shockley]

Hi @Eric P.

I'm a buy and hold investor with 11 rental units in the Jacksonville area, and also a licensed realtor. I've used the "BRRR" strategy to acquire the majority of my properties.

To answer your questions - the Jax market is pretty hot right now, but every once in a while a good deal will come along. One benefit of the market being "up" right now is it makes the BRRR strategy easier in that you can usually get a higher appraisal in future months - making it easier to pull out the cash you need.

Do you own any properties currently? Any investment properties? One thing most people don't realize with the "BRRR" strategy is your current income and current debt load are a huge factor in whether you will be able to qualify for future cash-out refinance loans.

With an investment property the bank will usually only credit 70% of your rental income towards your debt to income ratio - so the property needs to be SERIOUSLY cash-flow positive for you to qualify for the cash-out refinance. Alternatively you would need to have a high enough income from your "day job" to qualify to take on the additional debt load, without including the rental income.

I agree that the best opportunities (generally) pop up in "B" and "C" class neighborhoods - but reality is, there is no neighborhood where every house is automatically going to be a profitable rental property. So what I do - I keep an eye on a handful of neighborhoods across the city where I'm able to identify what a good deal is, price-wise. Then I'll go look at the properties near that price point to see what renovations are needed. Once I know the renovation costs I can then determine what the actual ROI would be.

Personally, I think turnkey is for suckers, because renovating properties gives you the highest rate of return in the long-run, and that's what has worked for me!