Lack of BRRRR opportunities in my <150K budget
Member since 2022 · 5 posts · 0 votes
Lack of BRRRR opportunities in my <150K budget
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Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
4y@Brandon Shim, the general answer is yes, the market is extremely hot right now, and appreciation in values is far outpacing rent growth in most all markets. As such, the likelihood of finding a property that you can refi 100% of your capital out is much harder to come buy, and/or takes a significant amount rehab (read: 1-2x your purchase price).
That being said, you will have to give somewhere. First Zillow is probably the least likely place to find a deal. Not that buying something "off market", by definition means it is a good deal, but you are competing against few potential buyers.
Second, I know you need to have a filler in somewhere, but 25% of purchase price for rehab barely gets you anything done these days.
Third, if you are willing to NOT get all your capital out at refi, or at least take the risk you won't, you will find more opportunities. In this market, to see a 30% increase in value is hard to achieve without taking on major renovations. I can still get that on flips, but my flips these days are full guts with new electric, plumbing, drywall, rework layouts, all new everything...
1% rule is hard to achieve today. Again, you can find these, but with so much investor AND retail demand, prices are way up. For reference, that 1% rule was the 2% rule about 6 years ago, until prices kept climbing and now you can't find anything outside of a war zone that gets close to 2% on SFR
Last point, you could probably use Zillow to find a light rehab that hits the 75% and 1% rules, but you will most likely be in a red zone.
All told, deals are hard, and you need take risk to make money. In today's market (which I personally don't see coming down much anytime soon) that risk is higher because you either need to accept less return or accept increased area and tenant risk...
10 Replies
- Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes4y
@Brandon Shim, the general answer is yes, the market is extremely hot right now, and appreciation in values is far outpacing rent growth in most all markets. As such, the likelihood of finding a property that you can refi 100% of your capital out is much harder to come buy, and/or takes a significant amount rehab (read: 1-2x your purchase price).
That being said, you will have to give somewhere. First Zillow is probably the least likely place to find a deal. Not that buying something "off market", by definition means it is a good deal, but you are competing against few potential buyers.
Second, I know you need to have a filler in somewhere, but 25% of purchase price for rehab barely gets you anything done these days.
Third, if you are willing to NOT get all your capital out at refi, or at least take the risk you won't, you will find more opportunities. In this market, to see a 30% increase in value is hard to achieve without taking on major renovations. I can still get that on flips, but my flips these days are full guts with new electric, plumbing, drywall, rework layouts, all new everything...
1% rule is hard to achieve today. Again, you can find these, but with so much investor AND retail demand, prices are way up. For reference, that 1% rule was the 2% rule about 6 years ago, until prices kept climbing and now you can't find anything outside of a war zone that gets close to 2% on SFR
Last point, you could probably use Zillow to find a light rehab that hits the 75% and 1% rules, but you will most likely be in a red zone.
All told, deals are hard, and you need take risk to make money. In today's market (which I personally don't see coming down much anytime soon) that risk is higher because you either need to accept less return or accept increased area and tenant risk...
- 4yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
For one, I'd not think so much in terms of the hard numbers. What if a deal has and ARV at 73% of the cost? Is that a bad deal?
The biggest mistake most aspiring investors make is running the numbers based on what the property is doing today. Who cares? This is a marathon, what is that property going to do for you in ten or twenty years? The trick isn't trying to figure out how to buy a property, its figuring out how to keep a property. Buy in growing and desirable areas and find properties that will at least pay for themselves in the short term. Time will take care of the rest.
- Member since 2022 · 1k+ posts · 1k+ votes4y
I would look for a better source than crimegrade. I just zoomed in on some areas that I've spent years and in some cases decades of my life, and it is showing class A+++ neighborhoods in the orange and even red zone for violent crime. And these are in wealthy college and beach towns where a murder may happen once every few years, and rarely at random.
Seems that they are trying to sell subscriptions and other home security services.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes4y
You're going to have to dig deep to find your BRRRR property. Zillow isn't the best resource. Build relationships, a team, and network with investors. If deals were found on Zillow they would be snagged up before you ever saw them
- 4yBenjamin AakerPro MemberRental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
It'll be tough to find a property meeting your criteria unless you do some driving for dollars and make connections with potential sellers who haven't listed. This strategy is very competitive right now and will require a lot of education and work. It can still be done. You've come to a great place!
- Investor · Chicago · Member since 2022 · 128 posts · 85 votes4y
I heard David Green on recent podcast mention that the 1% rule is aprox and slightly less is also fine. He basically said it's a round number.
- 4yRichard EvannsBusiness MemberReal Estate Agent · Los Angeles · Member since 2018 · 35 posts · 23 votes
regarding the crime thing, when it comes to BRRRRs, i would tend to trust my boots on the ground more than a crime map. And if you don't have boots on the ground in any given spot that you trust more than the crime map, then it might be time to get new boots on the ground---
That said, good BRRRR deals are indeed not that easy to find anymore, from public sources (and off market deals as always aren't that easy to come by)
There are companys out there that do mailer blasts that promise really high response rates based on proven metrics. I am going to try one, i will email you their info (i know a couple people swearing by them, i have never used them personally though, im just about to start)
Bigtown Homes59 Reviews - Member since 2022 · 25 posts · 21 votes4y
Driving for dollars is one the best ways to find off market/ great opportunity deals. There are many advantages of diving around to look homes that need help. You get to see the area and neighborhoods they are located in, accessibility to local amenities, traffic patterns and volume, opportunity to meet new people, sharpens your research and communication skills. The list can go on. Plus you can you’re dependent upon what the market says is available.
Develop a team of course but don’t limit your opportunities to others recommendations. Seek out and you will find, with persistence.
I agree that real estate is a long term wealth building lifestyle. So in the short term liquid gains don’t need to have superior priority, although helpful and required in most cases, it’s the mid to long term gains that make the most difference. Appreciation and tax privileges hold much value as liquid gains.
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