Are BRRRRs still a thing?

[Nash Mittelman]

BP! 

I'm an active real estate agent and investor in the Bay Area, almost done with the BRRRR book, and excited to get started building an out-of-state investment portfolio. I have some capital and looking into getting started w/ some BRRRRs, ideally multifamily properties (I really like 2 units for lending purposes, yet not super picky). I like Cleveland, Chicago, and Detriot because the price points there could still command some good rents, and also seem good for beginners. The ability to scale a portfolio and recycle the capital is really what has me excited about the process.

I'm curious, though, are BRRRRs still a thing, or has that space/strategy become too crowded? Is anyone still having success getting 100% of their investment out of the property to repeat the process? If so would love to chat. 👍

Also curious about what agents, lenders, or anyone in the BP community sees as a potential pitfall for BRRRs going into 2023 and the shifting housing markets. I worry that if values drop in 6 months the ARV will suffer making it harder to retain 100% of the initial investment.

 I understand that it ultimately depends on the price that you acquire the property for, and having all cash makes for getting some great deals.

Thx BP! 

[Andrew Postell]

@Nash Mittelman so I need to present a little different perspective on this. The BRRRR method hasn't worked with properties on the MLS for years. That might be changing...but I seriously doubt it. 99.9% of the time we are using the BRRRR method with OFF MARKET properties. Can you get 100% of your investment back?  Yes.  But really, unless you are self-sourcing your own deals it's probably not a realistic expectation to come out of pocket ZERO money.  But what if you came out of pocket $5,000?  Or $10,000?  That's very possible and that is still going on.  Now for most new investors trying this method there's 3 main areas that they struggle with:

1. Not knowing how to make the proper offer

2. Not having the right lending lined up

3. Not knowing how to calculate the proper numbers

For example - Let's say you get to the Refinance step and discover that you had to leave $10,000 in the property (meaning, you came out of pocket $10,000).  That means you either needed a better lender (who could lend more) - which is sometimes not possible, you needed to have $10,000 less in rehab (which is not really possible), or you needed to offer $10,000 less on the purchase.   And that last one is the usual culprit.

Now, sometimes people will say "well, if I would offer $10k less I would not have gotten the property!" And that's a fair point. I make about 100 offers per year and do 2-3 deals a year. That's it. Doing 2-3 BRRRR for 5 years means you are a millionaire. So you don't have to get crazy with this technique...but it is hard to do. However, me bringing 20% down on 2-3 properties for 5 years is IMPOSSIBLE.  So which do I want?  Hard or Impossible?  Hard it is.

Hope all of this makes sense.