Ideal Approach to BRRRR?

[Rick Edenkrans]

Switching strategy from fix-and-flip to BRRRR this year. I'm trying to understand some of the intricacies that separates the two. This is my understanding of a successful approach to scaling BRRRR.

1.) Purchase property (in name of LLC) and rehab it with cash. Keep all-in expenses to no more than 75% of ARV

2.) Get a properly screened renter (thru a reputable property management company) who signs an annual rent agreement that pays you with ACH direct deposit monthly. Ideally, set the rent at 1% (or better) of the all-in number.

3.) Refinance it with a commercial loan from a portfolio lender (or other lenders) on a 30 year note with a deed seasoning requirement of 4 months or less at 75% LTV.

4.) Repeat the first three steps.

Am I understanding this correctly and am I being realistic? Please feel free to correct any misunderstandings I have on the topic. My main questions, if I'm understanding BRRRR correctly, are; how common is it for lenders to offer a commercial 30 year note with low deed seasoning (if any) at 75%/LTV; and where is good place to look for them? I live in the DFW area in TX. If you're a lender who meet these asks, please reach out, I want to talk to you!

[Alicia Marks]

I agree with what Shiloh said. Have your endgame in mind. I would also say to make sure your rental numbers work before purchase. Take into account the cost of the rehab possibly going over, carrying costs, cap ex, etc. Just because you clear more than the mortgage doesn't actually make it profitable. You'll also want cash reserves as a rental investor. How much you keep is up to you, but I don't have a high W-2, so I make up for it in reserves that could cover major expenses (enough to replace roofs on several properties at once) That's for my peace of mind being a single parent running a business. I would also say that you don't need professional management. If you choose and it works with your numbers, great. At this point I only have a property manager for the out of state rentals and manage my local ones myself. Jump into an REI group in the area to network and learn the ropes. We have a great one in Grapevine depending on where you are in the metro.