BRRR & Flipping, Can you and should you do both?
Recently i have had a lot of investors trying to flip and BRRR at the same time. If theres a property where you can renovate, make large capital, and cashflow thats the unicorn we are all shooting for.
Most of the time if you do high end finishes like a flip, you will appraise extremely high, and you get capital back. But the downside is you will have a higher mortgage payment which will kill your cashflow.
For some reason a lot of people seem to think they will get both, and they are finding themselves in analysis paralysis waiting for the unicorn.
Thoughts?
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Jim K.
#3 Investor Mindset Contributor
#3 Investor Mindset Contributor
- Handyman
- Pittsburgh, PA
There's a point I'd like to make here: you do not go through "the same steps" with a BRRRR as you do with a flip. The nature of a BRRRR renovation and a flip renovation are usually significantly different things. Glossing over that difference injects a lot of misunderstanding and silliness in the process.
A flip renovation focuses on getting high-end finishes and touches into a project. Whether or not the finishes and touches actually last past perhaps six months, a year of use is of far less concern than what you do with a BRRRR renovation, because with the BRRRR, the house is going to stay in your portfolio. So conversely with a BRRRR renovation, the renovator needs to focus on the long-term health and low ongoing maintenance of the property, versus the gold-finish faucets and heated bathroom floor in front of the vanity. Less emphasis is put on those features that impress a retail buyer who is easily wowed by vanity touches: the coffee islands, the gas fireplace insets, the hot tub in a cramped bathroom that looks good but that chops off the leg room for the toilet. More emphasis is put on making sure the sewer connection is rock-solid, the window seals are intact, the water heater is properly sized for the family that is expected to occupy the property.
A flip renovation focuses on getting high-end finishes and touches into a project. Whether or not the finishes and touches actually last past perhaps six months, a year of use is of far less concern than what you do with a BRRRR renovation, because with the BRRRR, the house is going to stay in your portfolio. So conversely with a BRRRR renovation, the renovator needs to focus on the long-term health and low ongoing maintenance of the property, versus the gold-finish faucets and heated bathroom floor in front of the vanity. Less emphasis is put on those features that impress a retail buyer who is easily wowed by vanity touches: the coffee islands, the gas fireplace insets, the hot tub in a cramped bathroom that looks good but that chops off the leg room for the toilet. More emphasis is put on making sure the sewer connection is rock-solid, the window seals are intact, the water heater is properly sized for the family that is expected to occupy the property.