Zero Debt vs. BRRR Method

[Quentin Hilliard]

I’ve owned rental property for almost 8 years now, thanks to my dad who owns over 50 units. He basically financed and rehabbed my projects; I only mailed a check! Great dad right! Love that guy! 

Now I’m MUCH older and happy to say I completed my first rehab. Of course I NOW have the bug and I’m ready for more... except there’s this thing called CAPITAL.

I'm struggling with two schools of thought... My father is old school, he tells me to slow down, take my time and build my portfolio slowly. But then there's BRRR that screams go get ‘em tiger! There's also this little ‘angel' on my shoulder whom whispers, "hard money has 30-year terms now... and you're already approved!"

My thoughts are:

1. I like having no investment debt; my properties are my retirement plan and I’m too late in the game to take huge risks... I retire in 5 years (age 43)

2. I’m starting with cash, so my rehabs are not in the greatest of communities more like Oriental, Vermont and Connecticut if we’re talking Monopoly... I’m trying to build a solid foundation of cash flow before I branch off to St. James, Tennessee and New York Avenues.

3. Because my Lite Blue corner value is less than $50k, I'm stuck on the second R in BRRR... I can't finance it... so I have to build my cash flow up, to Repeat

4. I’ve been looking into hard money loans, to finance my rehabs, but the types of properties I’m considering are too small and/or, the fees are not inline with my good sense...and I don’t want to just go get a larger property and barely cover my expenses with the rent if the numbers do not make sense to me. The only way those numbers would make sense is if I were buying in quantity... and quite frankly, I’m not there yet.

I get it, people say, oh just get a personal loan.. well if I can’t get the Refinance, I don’t want a loan... so my only choice is to do cash... Unless YOU, yes YOU...reading this post can provide me some option I hadn’t yet considered. 

[Jaysen Medhurst]

A few things to think about, @Quentin Hilliard.

1. There is a happy medium between "take it slow" and BRRRR. Perhaps slowly get several projects up and running, then combine them in a blanket loan (the "Refinance" in BRRRR). Use the cash to then speed up the process as you rinse and repeat.
2. Can you step up to larger properties? Many HML are happy to finance commercial properties. What would the price point of a 6 or 10-unit property be near you?
3. Retirement: Hmm, well, 48 is pretty young to "retire" and 5 years is an aggressive time line, depending on how far along you are now.