What qualifies as a BRRRR?

[Natalie Klesaris]

Hi all!

My boyfriend and I are fairly new to the real estate game (4 doors) and for our next investment we want to BRRRR. My question is - we do not want to get in over our heads, so what do you guys qualify as a BRRRR? Can it just be cosmetic upgrades throughout? Does it have to be a complete demo? I know the more work we would put in, the more return we would get, but we want to start slow, and honestly the cash we would get at the cash our refi is not our priority as much as the cash flow we would be getting after the refi (at least on this first one LOL!)

Thank you in advance!

[Jaron Walling]

@Natalie Klesaris I think the BRRRR strategy is starting to fade. Most of the older experienced investors just call it... investing.

The only way to maximize the strategy is adding massive value or buying UNDER MARKET and securing a solid appraisal to bring it back up. Actually you need both to make it work. In most markets, at these higher rates, it's hard to get every dime out of a deal. We're about to cash-out a property and we're waiting for the appraisal to come back this week. For our property to cash-flow we're aiming for a 65-60% LTV loan... depends on appraisal. Can't cash-out properties that low, expect to leave zero $$$ the deal, and repeat. Those days are gone. Keep that in mind when you make offers. Look for a good spread with properties that need work. In a lot of cases cosmetic updates and minor repairs may not be enough to bring that market value.

I'd avoid a complete demo unless you have a lot of rehab experience and a good contractor base. Opening up the walls and ceiling gets expensive. Drywall is expensive. It's not that difficult to rewire outlets (with grounds) from the basement and upgrade the panel. Plumbing is a case by case situation. Spend 75% of your rehab budget on kitchens and baths. Find properties with leaking roofs and replace it. These items command a high price but protect your investment. 

Also, buy a property, rehab it, and pray rates drop! Could be a surprise bonus but very doubtful.