BRRRR Purchase formula???

[Havan Surat]

Hello,

I am new to BRRRR investment strategy and would like to explore and do some deals next year to add more units to my portfolio. I am wondering whether purchasing off-market deal with '70% minus repair costs' is good way to calculate offer price?. I want to purchase with hard money lending and then refinance it to get all my money back and would be available for next deal?

[Andrew Postell]

@Havan Surat the correct answer here is with another question - What can your hard money lender give you on the BUY step? Meaning, what's their LTV? If their LTV is 75%...then you could do 75% minus repairs. If their LTV is 90% of purchase + repairs not to exceed 70% of ARV...then that's the metric you need. So, the suggestion I would tell you here is to get the lender worked our first. Then that will help fill in some of the answers.

Generally speaking you will need several things to successfully complete a BRRRR:

1. ARV - being able to calculate the Value on your own (meaning, without the wholesaler telling you the value) is really important.
2. Repairs - You will likely need to know how to budget the repairs as well. Getting a contractor can be extremely frustrating especially if you need to make an offer without even looking at the property. How do you calculate repairs without a contractor? You may need to lean on other local real estate investors in the beginning. Or maybe even just focus on properties with a very light rehab?
3. Lenders - You will need a lender on your BUY step and on your REFINANCE step. And I would HIGHLY recommend to read this article I wrote for Bigger Pockets on how to find good lenders that you can find HERE. If they are good, they should be absolutely definitive on rate, terms, costs, etc. Trust me, many lenders will tell you they can do this...but it's very rare to find. When I first started BRRRR'ing my properties lenders would tell me "That's illegal"....it's not, they just didn't know anything about it.
4. Finding Properties - and this is the absolute hardest step of anything right now. So network like crazy and find some good resources. It's going to be hard...but if it were easy then anyone could do it.

Hope all of that makes sense.