Tips on how to do a successful BRRR

BRRRR - Buy, Rehab, Rent, Refinance, Repeat

Tips on how to do a successful BRRR

Buffalo Grove, IL · Member since 2017 · 54 posts · 39 votes

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information out there that I am trying to make sure I get the right info, but also not miss anything important or get outdated info.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.

2 Reply

37 views

Most Popular Reply

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

@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 =)

6 Reply

See this reply in the discussion

18 Replies

Jump to latestLatest

Sort by

Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
2y
Quote from @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.

Really?
"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."
What you are saying in your post is that you tried to do research, but there is a lot out there and you don't want to take the time to do the work so you want someone else to tell you exactly what to do. But also, if you don't want to be super friendly and give away everything to a stranger that you are bad? Confused here. This is like going on a dating site and putting in your profile that you have a lot of baggage so tread lightly.
BRRRR are the steps. The key to BRRRR is to buy right, that starts the cycle. If you are new to renovation, don't let people trick you into thinking things like adding a bedroom is easy or warranted. That just means the rest of the house will be smaller. Bedrooms definitely help on a BRRRR for appraisal, but the square footage is still the same.
[email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
Zen and the Art of Real Estate Investing59 Reviews
Website View Page
5 Reply
Nicholas A.
OP
Buffalo Grove, IL · Member since 2017 · 54 posts · 39 votes
2y
Hey Jonathan,

Thanks for the info.

Also to your question, I don’t want anybody to do hours of work for me. I’m asking for somebody who already knows some answers and can just point me there. I would assume that entails an 2-5 minute post? I suppose that’s the ask here. There is so much information online, that it’s overwhelming. I don’t know if what I run into is a bad source of info, outdated, or subpar. I also don’t know exactly what to look for, nor do I want to miss anything important. Research alone may not be good enough. I didn’t say anybody is bad because they don’t want to talk to me nor did I imply that. If somebody doesn't want to give me any advice that’s fine. I like talking to people as part of my research journey, and in my experience there are some people who don’t mind and are willing to help. This is a question for them.

1 Reply
Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
2y
Quote from @Nicholas A.:

Hey Jonathan,

Thanks for the info.

Also to your question, I don’t want anybody to do hours of work for me. I’m asking for somebody who already knows some answers and can just point me there. I would assume that entails an 2-5 minute post? I suppose that’s the ask here. There is so much information online, that it’s overwhelming. I don’t know if what I run into is a bad source of info, outdated, or subpar. I also don’t know exactly what to look for, nor do I want to miss anything important. Research alone may not be good enough. I didn’t say anybody is bad because they don’t want to talk to me nor did I imply that. If somebody doesn't want to give me any advice that’s fine. I like talking to people as part of my research journey, and in my experience there are some people who don’t mind and are willing to help. This is a question for them.

If you want to get the best answers, just add more to your post outside of the ask. How much money you have in reserves to do this, where you want to invest, what you know already, if you have an agent, if you have a lender, if you have any partners. Your post is just, hey can someone explain BRRRR in general, but you really want a more streamlined answer and someone can only give that if you give more details about what you are unclear about and what you want to do. I hope that helps.
Telling people not to respond if they are going to help in their own way won't get the best responses.
[email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
Zen and the Art of Real Estate Investing59 Reviews
Website View Page
2 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2y
@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 =)
6 Reply
Jake BakerBusiness Member
Flipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 696 votes
2y
@Nicholas A.
It is easy to underestimate your rehab budget. - make sure to get bids from multiple contractors and have adequate reserves.
It is easy to overestimate your ARV. - Have an agent pull recent comps for you
It is easy to underestimate the timeline. - whatever a contractor says, add 4 weeks.
[email protected]
BookkeepingRE - Bookkeeping for Real Estate & Service-Based Businesses52 Reviews
Website View Page
1 Reply
Nicholas A.
OP
Buffalo Grove, IL · Member since 2017 · 54 posts · 39 votes
2y
Quote from @Jonathan Greene:

Quote from @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.

Really?
"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."
What you are saying in your post is that you tried to do research, but there is a lot out there and you don't want to take the time to do the work so you want someone else to tell you exactly what to do. But also, if you don't want to be super friendly and give away everything to a stranger that you are bad? Confused here. This is like going on a dating site and putting in your profile that you have a lot of baggage so tread lightly.
BRRRR are the steps. The key to BRRRR is to buy right, that starts the cycle. If you are new to renovation, don't let people trick you into thinking things like adding a bedroom is easy or warranted. That just means the rest of the house will be smaller. Bedrooms definitely help on a BRRRR for appraisal, but the square footage is still the same.

So I am trying to get started in northwest Indiana, and also have been heavily looking in Birmingham Alabama. I have about 100-110k liquid I can use to BRRR. I was thinking of going to Gary, Indiana to invest and do BRRRs with my own cash instead of getting a hard money lender involved. I would be open to doing section 8. I would be open to other areas of Indiana as well. I fear using a hard money lender is an easy way to screw yourself over, although I don't know. Any thoughts on that would be appreciated. I have a lender who can give me good interest rates on conventional or DSCR, I do not have any contractors lined up yet though.

Regarding your last comment, I fully welcome links to other posts on the forum that are recommended from somebody. I am telling the grouches who say nothing more than to "go use the search button on the forum" for answers to my questions and nothing else. Whether or not they comment something like that wouldnt matter since those responses are just negative and meaningless anyways.
0 Reply
Nicholas A.
OP
Buffalo Grove, IL · Member since 2017 · 54 posts · 39 votes
2y
Quote from @Jake Baker:

@Nicholas A.
It is easy to underestimate your rehab budget. - make sure to get bids from multiple contractors and have adequate reserves.
It is easy to overestimate your ARV. - Have an agent pull recent comps for you
It is easy to underestimate the timeline. - whatever a contractor says, add 4 weeks.

Can I trust the comps the realtors give me?
0 Reply
Nicholas A.
OP
Buffalo Grove, IL · Member since 2017 · 54 posts · 39 votes
2y
Quote from @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 =)

Hey man I appreciate the insight. Are you investing in Pittsburgh?

Do the appraisers always round way down when the comps are all over the place?

What are your thoughts on investing in another area? Cant there be another area somewhere that is doing better than others?
0 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2y
@Nicholas A.
yes, i invest primarily in the Pittsburgh area.
I'm not an expert on appraisals, I've just had them come in "low" multiple times for various reasons. An appraisal is not for you, it's for the lender, so they're incentivized to be conservative, not generous. Sometimes I see people on BP say something like, "the ARV is probably 250-350K" - and that's a recipe for disaster.
investing in 'another area' - in order to BRRRR you really need to be hands on. so wherever you can be hands-on / in person is best. at my BRRRRs i sometimes do the demos, i buy materials, i mow the lawns, etc. it's certainly possible to do them at a distance - just much, much tougher. and more expensive because you're paying for absolutely everything.
0 Reply
Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
2y
I would just follow David Greene's method in his book on the topic: https://www.amazon.com/Buy-Rehab-Rent-Refinance-Repeat/dp/B0...
Or could you check out my video on the topic which in my biased opinion is pretty good:
Podcast Guest on Show #121
0 Reply
Linda LabbePro Member
Investor · North Bay, Ontario · Member since 2015 · 709 posts · 263 votes
2y
Brrs are much harder now then they were in the past. That being said we are finding and doing them In Detroit and some time in Toledo. More then willing to chat with anyone who wants to know how
1 Reply
An Nguyen
New to Real Estate · Hinton, WV · Member since 2023 · 13 posts · 4 votes
2y
Quote from @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 =)

May I know the reason you messing up the last one? So it can be a good lesson for us to learn
0 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2y
@An Nguyen
1. It didn't appraise for as much as I thought it would, and
2. It wasn't going to rent for as much as I thought it would
0 Reply
Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
2y
Quote from @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.

Hey mate,

Thick skin is needed on this forum and in business in general 🤷‍♂️

I just posted something similar on another thread and the best advice I can give is spending enough time finding the right people on the ground before looking at the prospect of a market or a deal.

Especially when doing BRRR out of state which is a very tough gig IMO.

You can find the best market, with the best growth potential, find the best deal with the best cashflow but if your realtor isn't genuine, your property manager is incompetent and your contractor is a cheat.

You will loose money.

Also, underestimate your income and overestimate your expenses on every deal and business opportunity.

If you think it won't happen to you, I can tell you right now that it unfortunately will...

I've completed hundreds of flips and rarely come in at budget from a rehab standpoint.

So keep that in mind.

Appraisers are a joke and easily manipulated.

They follow weird data and many want to cap you intentionally (No idea why...) on the ARV.

They play it safe and can see how much you paid and what you spent on rehab so they will cap the value and come in under fair value on many appraisals.

I stopped dealing with selling to investors looking to finance many moons ago as it wasn't efficient from a business perspective and I'm not in the business of using "in-house" lenders and manipulating appraisals like many others do.

Just my 2 cents.

All the best.
Podcast Guest on Show #89
Oz Realty4.5368 Reviews
Website View Page
0 Reply
Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
2y
Quote from @Linda Labbe:

Brrs are much harder now then they were in the past. That being said we are finding and doing them In Detroit and some time in Toledo. More then willing to chat with anyone who wants to know how

You can say that again. BRRRRs were a lot easier when rates were in the 4s. It was harder to find deals in many cases, but the financing more than made up for it.
Podcast Guest on Show #121
0 Reply
Jordan Connett
Real Estate Agent · Denver, CO · Member since 2019 · 16 posts · 2 votes
2y
Personally i'm in Denver and BRRRR is not a strategy I'm chasing right now due to the fact I cannot cashflow deals with rates and prices. we are still flipping, developing and buying larger apartment projects (sometimes BRRRR on those) but single unit BRRRR is not a strategy for us, here, right now.
0 Reply
Linda LabbePro Member
Investor · North Bay, Ontario · Member since 2015 · 709 posts · 263 votes
2y
Quote from @Jordan Connett:

Personally i'm in Denver and BRRRR is not a strategy I'm chasing right now due to the fact I cannot cashflow deals with rates and prices. we are still flipping, developing and buying larger apartment projects (sometimes BRRRR on those) but single unit BRRRR is not a strategy for us, here, right now.

we are seldom doing Brrr s on single family units duplexes and 4 plexes are what works. More then willing to chat with anyone and explain how we do this
0 Reply
Joseph Bui
Lender · Nationwide · Member since 2023 · 362 posts · 237 votes
2y
I've done multiple BRRRRs in a couple midwest markets. The key is to have a good and trusted team on the ground if you aren't located there. More than happy to connect and share about my BRRRing experience.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.