Tips on how to do a successful BRRR

[Nicholas A.]

Hey Everybody,

I am trying to get started doing BRRRs in northwest Indiana, but I have never done a BRRR before. Really, I want to get started but there is so much information out there that I am trying to make sure I get the right info, but also not miss anything important or get outdated info. Its a bit overwhelming if that makes sense. I was presented with an off market deal in Hammond with the potential to rehab it and add another bedroom, so I am trying to size it up as well and see if its worth it. I can provide more details if somebody wants, but really the focus for now is for somebody to provide some structured steps so I can create a plan and put it into action. Anything would be appreciated!

Because there are people on every forum who do this, for all the haters out there that are about to moan and gripe in an attempt to make me browse the forum for hours on my own time for answers and provide nothing more than that, I am not talking to you. Unless you own or moderate the forum, I don't owe you anything, and your complaints will be ignored. Asking people for advice has its place, and if it bothers you that I am doing so, you can ignore my post.

[Nicholas L.]

@Nicholas A.

happy to help - can you give us more info as @Jonathan Greene pointed out?  i've done several BRRRRs, including one that just 'failed,' so i sold it as an accidental flip, and here's the deal.  i am not going to sugarcoat it.

in no order:

-BRRRR is really, really tough overall right now. tougher than advertised. there is lots of competition for deals; good contractors are booked up; materials are expensive; and interest rates are high.

-you generally have to buy a severely distressed property at a steep discount. if your ARV is 200K, for example, and it needs a medium or greater rehab, you probably need to buy under 100K. 150K won't cut it, you'll lose money.

-you likely won't cash flow at all when you refinance, and you might even be negative. if you use a DSCR loan expect your closing costs to be 5-10K and your rate to be in the mid 7s to high 8s. new investors are ALWAYS surprised that there are closing costs. since a BRRRR involves a purchase AND a refinance, you'll 'close' twice and likely pay 10-15K just in closing costs.

-it's much harder to 'add bedrooms' than David Greene says in all the podcasts.  if you found a property where it's straightforward, great.  but it may not be.  you can't just call something a bedroom.  you have to look at your building code and talk to GCs who have done it.

-your refinance will be dependent on your appraisal, and appraisals are inconsistent.  the appraiser couldn't care less how much you spent on the rehab, or how shiny your countertops are.  they are going to go by COMPS, and if the comps are all over the place, they will round way, way down.

hope this helps

not trying to be negative, just realistic after doing 5 myself and 'messing up' the last one =)