BRRRR strategy - Does credit score matter?

[Ismael Candelario]

I recently graduated from college and have become interested in applying the BRRRR strategy in the area around Louisville, Kentucky. I'm in the process of reading the BP books and still have a lot of reading/learning to do. With that being said, I have some questions about financing using this strategy. Are banks likely to finance homes with the intention of it being BRRRR'ed. Should I try and find partners to go in with me instead? Is establishing credit give me a better opportunity to gain credibility with banks when it comes to financing my REI's. What is the easiest way/useful tips, you guys have found to be useful when it comes to financing home using the BRRRR strategy.

To those who use the BRRRR strategy, what suggestions do you guys have for a newbie like myself. Any advice will help! I'm a sponge just waiting to absorb as much as information as I can.

[Andrew Postell]

@Ismael Candelario thanks for posting. I hope you continue to enjoy Bigger Pockets. 

When starting out I feel that leaning on other investors is going to be your best asset.  Go to local Real Estate Investor meetings.  Continue to learn from other investors here. Anything that you can do to understand what goes into real estate will help you in your journey.

Now, the BRRRR method does have some very specific requirements to be successful when using this strategy. Keep in mind that the BRRRR method helps us AVOID traditional financing. If you are a regular person off the street and you want to buy an investment property it is likely you will buy a home off the MLS while needing 15%, 20% or 25% as your downpayment. So if you are buying $200,000 properties, and you have $100,000 in the bank....then you can only buy 2 properties? And that's if you have $100,000!

So the BRRRR helps us buy properties with less out of pocket.

Generally speaking we target properties that are "off market".  That means you need to know how to find these types of "off market" properties.

Generally speaking we need financing to "Buy" the property.  We also need financing to "Refinance" the property.  So you'll need to know what you can qualify for.

In order to make our offer we need to know how to calculate "After Repair Value" - with help at first.  But you need to be able to learn how to do it WITHOUT help later.

You will also need to know how to calculate "Rehab" costs. Same thing here...maybe with help at first.  But you will eventually need to know how to do it without help as your career progresses.

Knowing how to calculate "holding costs" is also important.  This is the amount of money you need during the rehab phase...not to pay for rehab....but to pay the loan payment while your home is not making money. Your insurance, your utilities...anything that is a cost while you "hold" the property.

Now, formally, you don't HAVE to do anything of that...but it would certainly help a great deal if you did.  Hope this helps!