Does a house need to be rundown to BRRRR?

[Yumiko A.]

Very new to real estate investing here and looking to start my first BRRRR. I'm looking at affordable markets such as Columbus OH (any other market suggestions welcome) because my down payment and rehab funds are limited (hoping to stay at around $40k) and I'm hoping to do a cash-out refinance to get more cash to invest. How do people find good BRRRR properties? Does it need to be rundown so you can get more value after the rehab? How long does rehab usually take these days? I'm eager to invest and re-invest so a fast turnaround time would be great (might be asking for too much!).

Any help/tips is appreciated! Thank you!

[Account Closed]

@Yumiko A. Regarding finding properties...Check out Driving for Dollars as a way to find off-market "affordable" properties. Essentially, you drive around looking for uninhabited homes or rundown ones, look up the tax records free on the town/county website, craft a letter with your intent to purchase the home, and mail the owner directly. You could also attempt to look up their phone number and cold call if you're comfortable with such. The nice thing about a personalized drafted letter is that it's tangible in their hands if even for a moment. Be consistent in your letters, potentially expect 8-12 letters (spread 3-4 weeks apart perhaps) to each property owner before you get a response! There are great BP videos on this, especially from Anson Young and others.

[Theresa Harris]

Find a place that is solid and has potential to add equity through updates/renos.  Buying a fixer or doing major renos can be risky.

[Remington Lyman]

Originally posted by @Yumiko A.:

Very new to real estate investing here and looking to start my first BRRRR. I'm looking at affordable markets such as Columbus OH (any other market suggestions welcome) because my down payment and rehab funds are limited (hoping to stay at around $40k) and I'm hoping to do a cash-out refinance to get more cash to invest. How do people find good BRRRR properties? Does it need to be rundown so you can get more value after the rehab? How long does rehab usually take these days? I'm eager to invest and re-invest so a fast turnaround time would be great (might be asking for too much!).

Any help/tips is appreciated! Thank you!

I recommend you read this article on OOS investing. It explains the importance of creating your core four. You will need to get a local, rockstar Realtor, contractor, lender, and property manager.

https://www.biggerpockets.com/blog/core-four-real-estate-team

I invest locally in Columbus, Ohio

[Will Barnard]

Originally posted by @Theresa Harris:

Find a place that is solid and has potential to add equity through updates/renos.  Buying a fixer or doing major renos can be risky.

 Driving a car can be risky! Mitigate risk of investing by education, knowledge of your market, and how to source good deals. Your profit is mostly made at your purchase.

[Will Barnard]

Originally posted by @Yumiko A.:

Very new to real estate investing here and looking to start my first BRRRR. I'm looking at affordable markets such as Columbus OH (any other market suggestions welcome) because my down payment and rehab funds are limited (hoping to stay at around $40k) and I'm hoping to do a cash-out refinance to get more cash to invest. How do people find good BRRRR properties? Does it need to be rundown so you can get more value after the rehab? How long does rehab usually take these days? I'm eager to invest and re-invest so a fast turnaround time would be great (might be asking for too much!).

Any help/tips is appreciated! Thank you!

You do not necessarily need to find a fixer to BRRRR, however, one of those "R's" is "rehab" so technically speaking yes but that could be a simple lipstick rehab. The key to this or any RE investing strategy is to buy correctly, which is to say, buy with a discount (equity at purchase). Most deals will not be found on a home in move in condition. Knowing that, your target properties should be those in need of repairs. Hope that answers your question more specifically.

[Nicholas L.]

@Yumiko A. you mentioned you only have funds for a "down payment," this is going to make it more difficult as it's much, much tougher to try to use conventional financing.

[Marc Rice]

@Yumiko A.

Most often than not, the good BRRRR deals are run down but it doesn't have to be that way. You can find other good deals that need cosmetic touch ups and still make the numbers work.

You can also use a hard money rehab lender to fund the rehab costs so that you can take on a better Brrrr project.

[Yumiko A.]

Originally posted by @Marc Rice:

@Yumiko A.

Most often than not, the good BRRRR deals are run down but it doesn't have to be that way. You can find other good deals that need cosmetic touch ups and still make the numbers work.

You can also use a hard money rehab lender to fund the rehab costs so that you can take on a better Brrrr project.

 Good idea on getting a hard money lender to finance the rehab costs. Do you know if there’s a penalty if you pay right when you get refinanced? Would want to avoid the high interest rates. Thank you!

[Yumiko A.]

Originally posted by @Will Barnard:

Originally posted by @Yumiko A.:

Very new to real estate investing here and looking to start my first BRRRR. I'm looking at affordable markets such as Columbus OH (any other market suggestions welcome) because my down payment and rehab funds are limited (hoping to stay at around $40k) and I'm hoping to do a cash-out refinance to get more cash to invest. How do people find good BRRRR properties? Does it need to be rundown so you can get more value after the rehab? How long does rehab usually take these days? I'm eager to invest and re-invest so a fast turnaround time would be great (might be asking for too much!).

Any help/tips is appreciated! Thank you!

You do not necessarily need to find a fixer to BRRRR, however, one of those "R's" is "rehab" so technically speaking yes but that could be a simple lipstick rehab. The key to this or any RE investing strategy is to buy correctly, which is to say, buy with a discount (equity at purchase). Most deals will not be found on a home in move in condition. Knowing that, your target properties should be those in need of repairs. Hope that answers your question more specifically.

 Yes, that helps a lot! Thank you!

[John Teachout]

Simple answer is yes. Because you have to make the property worth more. (forced appreciation) It could be accomplished by purchasing the property for less than what it's worth but that's very unlikely for a property in excellent condition.

[Nate Sanow]

@Yumiko A.

No. It doesn’t need to be run down. Its purchase price needs to be well enough below 75-80% of Arv - repairs - closing costs that it can be a successful brrrr

[Evan Parker]

@Yumiko A.

No it doesn't need to be rundown necessarily, but it's definitely going to be a home that requires pretty much a complete interior renovation.

Think new floor, new paint, new fixtures, all updated little bits and pieces etc. that just make the home look modern/present day.

Depending on the market and home condition you can get by without touching the exterior, but again it depends on market and exterior conditions.

[Clay Boykin]

@Yumiko A. Yes it is true that most properties need to be run-down to use the BRRRR strategy, but it is not necessary. Simple updates done to the home like new floors, simple exteriors touch ups. As long as your financing is in order, there shouldn't be any issues with the tactic. At the end of the day, BRRRR is all financial. Your owning an asset with acquired equity. Very simple.

[Brandon Goldsmith]

The more run-down property is the better the chance for pulling out all of your money and more. It doesn't have to be completely run down, it could be a cosmetic value add in general, but the more value you can add the more equity you add to yourself. @Yumiko A.

[Dave Schmidt]

@Yumiko A. You are going to want to more then likely find a local hard money lender or small bank willing to give you a loan for the property and potential rehab. This is going to allow you to get more from your $40k. Typically there should not be a pre-payment penalty if you have the funds out for a couple months. Something to remember with hard money lenders - they will likely want to know who will be the bank/company refinancing the loan BEFORE they agree to any terms with you. So you will need to get quite a few ducks in a row before you go making a ton of offers!

In regards to the property itself, I don't know if I would focus entirely on run down properties. Something not mentioned above or very often on this site is the ability to cherry pick or being selective. Maybe take some time, energy, money and  then market for the right opportunities. If you have all of your ducks in a row you might just be lucky enough to find a fed up land lord looking to sell fast because a tenant hadn't paid him for the last 18 months!

Hope this helps!

[Steven Foster Wilson]

Originally posted by @Yumiko A.:

Very new to real estate investing here and looking to start my first BRRRR. I'm looking at affordable markets such as Columbus OH (any other market suggestions welcome) because my down payment and rehab funds are limited (hoping to stay at around $40k) and I'm hoping to do a cash-out refinance to get more cash to invest. How do people find good BRRRR properties? Does it need to be rundown so you can get more value after the rehab? How long does rehab usually take these days? I'm eager to invest and re-invest so a fast turnaround time would be great (might be asking for too much!).

Any help/tips is appreciated! Thank you!

Ive found the key to doing a BRRRR deal is buying at the right price in an appreciating neighborhood, usually the C/B neighborhoods.Thats why I like Columbus as a BRRRR market

My first BRRRRR was $300k, put $50k into it, refinanced, and got $90k back. I just refinanced again and got another $50k and it still cash flows $1800/month.

Second BRRRRR cost $160k, put $55k into it, refinanced, and got me just under $200k back and cash flows $2000/month.

Currently working on my 3rd BRRRR in the city!