BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Updated almost 4 years ago, 02/15/2021
BRRRR Success Detail Deal Analysis
Bought Oct 2020 today Feb 2021 (4 Months Total)completed a successful BRRRR
What’s that?! Read below
I paid $78,000 for it. Property was outdated and distressed. It needed a full revamp to bring it to 2021 standards.
New: Roof, kitchen, bathroom, flooring, appliances, HVAC, plumbing, electrical etc.
Originally the property was a 2BR 1BA however I stole some space from the living room to add an additional bedroom.
I knew I would need that additional bedroom when I went to do a refinance and the appraisal would boost my value if it was a 3BR instead of a 2BR
Total renovations cost me $40K
I got the property rented out for $1,285/month
Let’s Recap $78K purchase + $40K renovation = $118K Total all in cost + private lender costs
oh by the way I didn’t use any of my own money 💰 a private lender funded the entire purchase price for me! Oh and He agreed for me not to pay him any interest until after I refinanced the property so I had no expenses while I was in renovation mode except for the renovation costs labor and materials.
Private Lender $80,000 Loan at 10% annual interest = $666/monthly payment x 4 months I used the money = $2,666 interest I paid back to my mender so now my all in cost is $118K + $2.6K = $120,600 all in
I did a cash out refinance property appraised for $185,000 ( wow that’s $55K in instant equity 🤩)
Lender offered me up to 75% LTV $138,750 I could pull out but in order to get maximum monthly Cashflow I decided to only borrow $127,500 against the property
Now remember I am all in $120,600 and now at the closing table I am getting back $127,500
Wait a minute! I am walking away with $6900 in my pocket!! I am getting paid to own a house!! Yes ladies and gentlemen that is possible
Research BRRRR method
Buy, Repair, Rent Out, Refinance, Repeat
This is how you create infinite returns and how you own houses with $0 of your own money 💵
To summarize
Mortgage Balance $127,500
30YR Mortgage 4.37% interest
Monthly payment including Taxes & Insurance = $750
Rent $1,285 - $750 = $535 Net Cashflow in my pocket monthly
Remember I have $0 of my own money invested in the deal!
Time to go look for my next BRRRR deal! Talk soon ✌️ 🙏
Awesome, thanks @Alex Babayev!
Do private lenders typically hold on collecting interest until you refinance? And excuse the rookie question - just diving into BRRRR - but what were you using the $80K for for four months after you refinanced? In my mind, once you refinance you would pay the lender back and move onto Redo, but I'm sure I'm missing a step (or a couple) here.
@Alex Babayev Nice work!
@Alex Babayev
Thanks for the in depth response and no I have not given up and things are going relatively well. Sorry if that post came off as negative but I’ll be honest - I’m jealous.
Those numbers are awesome and it sounds like you are dialed in!! Hoping to streamline my costs and improve as I go.
What is your goal? Exit strategy? Or end game?
How many properties do you have? It sounds like you are already inching towards retirement? Are you looking for millionaire status? Free time?
I know that’s pretty vague. My personal goal is to get financial freedom so I can pursue my hobbies. Keep killing it. And if you happen to live near Baltimore. Let’s get a drink!!! Cheers
Originally posted by @Alex Babayev:
Originally posted by @Jim Piety:
@Alex Babayev great example of a clean, photographic BRRRR! Would love to see the before and after photos. My question is how did you do the rehab? How did you come across your contractor and do the design? Thanks for sharing this awesome win. Congrats!
I have been in Atlanta market 10+ years so I have a well developed relationship with contractors. I used my own money to fund the rehab labor and materials. I design all of my properties myself. After doing over 100+ flips it comes as second nature at this point to design my properties. Follow me on insta for all my before and after photos @transformation_papi
Here is the link to before and after's
https://www.instagram.com/p/CJLe0XSjeoZ/?utm_source=ig_web_copy_link
Oh wow, these are great photos! Consider me a follower.
What do you recommend somebody who is just getting started? My biggest unknown is what the costs are to renovate a property. Should I just reach out to GCs and have them come to a property with me?
@Alex Babayev That s awesome. I am new to real estate and learning daily. Listing to the pod cast, reading the forums and learning the lingo. I am hopeful that our first deal will be as successful.
@Alex Babayev congratulations!!! Sounds like a killer deal.
I always say, BRRR is the way. I'd recommend it to anyone despite experience level as it is simply the fastest way to build wealth through real estate! And the thing is, it's not as difficult as most think. All you have to do is have your team in place. Core four so to speak.
You can start here, on BP, searching around to find the REI minded locals in your desired market to build up your team OR partner up with a local agent who is familiar with the process and can guide you through it. As well as, hopefully, already has their on team in place.
I primarily help investors go through this process in my submarkets of Charlotte, NC by having a team of contractors, pm’s, delayed financing lenders, attorneys etc.... and did I mention actually decent contractors? Lol. Definitely the most difficult piece to the puzzle but they’re out there.
It's all about relationships. Anyone, anywhere can successfully do a BRRR as long as you have that core four in place supporting you!
Okay, enough promotion for the BRRR strategy. (You're welcome, @beardybrandon)
Reach out if you need anymore encouragement to do a BRRR. I have more in me.
@Alex Babayev well done!
Congrats! Where do you buy these houses that you can get it for 78k put in 40k and appraise at 185k. I live in NJ and this means you are in the ghettoest of the ghettos. Is this method possible in NJ or other metro areas?
@Alex Babayev awesome!!!
@Alex Babayev have you paid the rehab with the credit cards initially and then paid them off when you refinanced ? Please explain
Originally posted by @Davide Pascucci:
@Alex Babayev have you paid the rehab with the credit cards initially and then paid them off when you refinanced ? Please explain
Yes , that is definitely an option if you are first starting out take advantage of Home Depot / Lowe’s credit cards that give you 6-12 month interest free- also can sign up for various credit card promotions that offer you 18 months no interest
For this particular transaction I just used my Amex Platinum and then just paid it off at end of month. But definitely when Infirst started out In real estate I used the credit card hacks
Originally posted by @Christopher Guerriero:
Congrats! Where do you buy these houses that you can get it for 78k put in 40k and appraise at 185k. I live in NJ and this means you are in the ghettoest of the ghettos. Is this method possible in NJ or other metro areas?
Remember I forced the appreciation here, when I bought it it was a dinky distressed 2BR house 🏡- I stole space from living room and forced a 3rd bedroom because I knew I would need that boost on my appraisal
you have to create the deal! You do not buy these deals you create them with creativity and a plan to action!
Originally posted by @Nicki Shelton:
@Alex Babayev That s awesome. I am new to real estate and learning daily. Listing to the pod cast, reading the forums and learning the lingo. I am hopeful that our first deal will be as successful.
Remember you won’t become rich on your first or second or third deals, use your first couple of deals as education so even if you are not as successful on them they will be great stepping stones for your future as a real estate investor.
This is very textbook BRRRR! I heard about this great approach years back and I just started to pick up real-estate investing again. Seems like relationships are everything. Congratulations! @Alex Babayev
BTW, any recommendations on how to start when living in a HCOL area such as Seattle/San Francisco Bay/Boston?
@Alex Babayev NICE! I am new to BiggerPockets and am excited to start this method. Thanks for sharing
@Alex Babayev Congrats! Btw, I would run the number again for the accurate monthly cash flow. Maintenance, capex, vacancy/tenant turnover, PM unless you manage yourself.
Originally posted by @Alex Babayev:
Originally posted by @Chandler C.:
@Alex Babayev sounds like a very successful BRRRR deal! How were you able to cash out refi in under 6 months?
For a Freddie Mac cash out refi, I know the borrower must have been on title to the subject property for at least 6 months, hence the typical 6 month seasoning period.
You are correct is using a conventional Freddie Fannie loan their is a 6 month seasoning requirement you can avoid that requirement if you search for smaller banks who do 'portfolio lending" which means they lend out their own internal funds on deals like this and are not subject to fannie and freddie guidelines.
Also this was a secondary party lender who is not subject to those guidelines as well as they use their own funds to buy the note and then sell the note on wall street.
Why kind of rates are you seeing from the portfolio lenders? They much higher than investment rates being run through fannie/freddie?
Originally posted by @Jay Yoo:
@Alex Babayev Congrats! Btw, I would run the number again for the accurate monthly cash flow. Maintenance, capex, vacancy/tenant turnover, PM unless you manage yourself.
We have 40+ rentals self managed in my company internally- if you are new and don’t have cash reserves I agree need to put away reserves from Cashflow amount monthly but I personally don’t put away any reserves for caped, vacancy etc.
we first fully renovate all of our rentals and I mean fully electrical plumbing roofing HVAC water heater etc. which causes very very minimal caped in first five years of our rentals.
Butt yeah if you have no money definitely need to put money away for reserves for me I can weather the storm and don’t need to put away for reserves.
@Alex Babayev the lender paid for the renovations as well?
Originally posted by @Colby D Hollins:
@Alex Babayev the lender paid for the renovations as well?
No I paid for the renovations out of pocket
@Alex Babayev gotcha
@Alex Babayev
Nice work! Awesome that you used OPM to fund the entire deal and walked away with total control of a cash flowing asset with $7k.
Way to go!
Originally posted by @Patrick McGrath:
@Alex Babayev
Nice work! Awesome that you used OPM to fund the entire deal and walked away with total control of a cash flowing asset with $7k.
Way to go!
Thank you! Other Benefits include, tax depreciation, tax free cash out, my net worth went up by the value of the property, etc.
@Alex Babayev
Awesome deal been reading up on the brrr strategies and kinda used it in property I currently live in but haven't moved on to rent it out yet. Just bought another one that needs some work going to brrr it.. would like to sell first one but haven't owed it for 2yrs yet and not sure if that would be too costly with capital gains taxes. I want to use money to invest in a multi-family any suggestions would be nice from experience member..