Is BRRRR Right for Me?

Question

I am looking for a way to get into real estate. In part to find a secondary (and hopefully over time, primary) income stream. But mainly because I LOVE it! I have always been interested in building and designing homes, rehabbing, and so on. I purchased my own home in 2019 and redesigned and renovated, mostly on my own. I do not have the luxury of leaving my current soul-sucking job and stable paycheck to dive into this full time. I also do not have the finances to take this on right this minute. But I am very interested in learning the BRRRR method, the risks and rewards, pros and cons, and whether buying and flipping would be a better fit, or if there are other ways to invest in real estate as a step in the right direction toward these greater goals.

Steven Goldman · Answer

@Jordan Henn    I have always been fascinated with all things  real estate. The question "Is BRRRR Right for me? Is the wrong approach. I have learned that to successfully execute in real estate investing you have to find  off market or good deals and then  tailor your strategy to the best return on that property. So, if the property is a strong fix and flip, the margin is large enough, I would fix and flip it. If the property has a strong D.S.C.R. and a good N.O.I. I would BRRRR it.

Sometimes, I would be looking for a  BRRRR and instead  find a good flip and vice versa. The toughest task in real estate is finding good properties! Good luck.

Jack Melton · Answer

The Collecting Keys Podcast guys are based out of Spokane and I think you would be interested in their podcast! They are full time investors and are really detailed with their stuff. They also do coaching if you really want to dive in for mentoring. Podcast is worth a listen for sure though!

Ryan Deasy · Answer

@Jordan Henn

BRRRRing is a great way to get started! i hear you on the soul sucking job too.. i really do...

get yourself a good hard money lending and/or financing partner. this was crucial for me.

Matthew Tregoning · Answer

If your main concern is leaving your current job to get into real estate. I wouldn't recommend long-term rentals as these can take years to build up enough cash flow to quit your W-2. Short term rentals, wholesaling, flipping, and getting into the agent side of things are some options that will get you there much quicker.

Mike Klarman · Answer

The end goal for us is to build income producing real estate companies that is liquid enough to purchase luxury real estate and multi-fam buildings.  I know that's what I want in my portfolio.  I am getting into investing as well even though I broke in on the lending side.

If I had a choice of making 30k profit on a deal, or refinancing and getting half my investment back plus now I get a 300/month cash flow stream, I'd choose the 30k all day long.  These residential SFH aren't great income producers on the DSCR formula, however the profits from their flips can add up.  Put time into creating networks on the ground in the markets you wanna work in.  You need an agent and a contractor that can work together.  They will find you deals and then you are set-up to get the work done and sell it.  Create a flipping assembly line in three markets.  That will be in the income for your company and then you will invest the profits into your portfolio.  The nice stuff that produces good income and has great appreciation rates.

I'm helping a few new investors set their first network up now, one BP'er I been working with last 6 weeks even made their first purchase.

Bruce Woodruff · Answer

IMHO only, BRRR is best taken on by those with a construction background of some sort. No, you don't have to be a Contractor, but it helps so much. And your ROI is so much higher. And you have more fun..... :-)

Sarah Hatton · Answer

Hi Jordan,

It seems the bigger question is if you want or have the TIME to invest passively or actively. Given you have a full time job, how much time do you have to put into this? in my opinion active investors should be full-time focused on the investment and I consider both BRRR and fix and flip active investment strategies requiring full time attention. Time often will lead to money, so if don't have a lot of time to make sure things don't go wrong then theres a good chance things will go wrong and there wont be time to manage the issues. There are good passive investment strategies options that include things like investing in REIT (real estate investment trust), hard money fund, apartment syndications, JV agreement with a flipper, etc.

And like the another BP member mentioned, BRRRR is about creating wealth, not income. Reason being when you refinance the max cash out is 75% of current value so some of your equity will stay in the project, and then your profits will go directly into the fourth 'R', REPEAT. It's also important to remember rental homes will have maintenance issues, so some profits will be offset by that as well. The Fix and Flip method is similar if you keep reinvesting, however when you sell you'll recoup your investment PLUS profit.

Hope this helps!

Eliott Elias · Answer

BRRRR is great for creating wealth, not income. It's a cool strategy and you end up with a property that you paid nothing for, but your returns are basically nothing and you won't see your rewards until 10 years or so. I would look at it as a retirement account

Is BRRRR Right for Me?

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