Houston-area market concerns (BRRRR)...

[Brad Turner]

Good morning everyone! Rookie investor here - no properties yet but I hope to change that in the coming months. My partner and I are in the NE Houston area and looking to get started investing in this area. We've settled on the BRRRR method to start off with, unless something else ends up making more sense.

We currently have $100K cash (purchase power) and hoping to close soon on $50K HELOC (rehab power). From everything I've researched, all-cash offers seem to be the way to go if we want to have a chance of standing out and not paying over asking price. Since we don't have a ton of capital to compete for some of these exorbitantly priced homes, I understand that to mean we need to find the highly-distressed properties that more established investors aren't wanting to spend time on, then get well-priced rehabs done to get the ARV where it needs to be to cash flow and do the cashout refi. All for under $150k.

From looking at available properties, this seems to be a very tall order. I would be interested to get other perspectives on this. Do these homes exist? Homes I can get under $100K that can rehab for under $50K and end up with an ARV at-or-better-than 80% of the all-in cost so we can pull all our cash back out? If we buy and rehab all-in at our max $150,000, we would need to have an ARV at $188,000 to pull it all back out on a cashout refi. Or am I too focused on pulling it all back out? How common is that? Should I expect to leave money in most of my BRRRR deals?

I understand I can "simulate" all-cash offers with private money and/or hard money loans. My concern is that without having a track record of success, convincing a lender to invest with us could also be an issue. Is that accurate?

I understand I may be WAY off-base with these presumptions as well. And maybe I'm off-base with thinking all-cash is the way to go and should re-double my efforts in looking at conventional lending to secure the more-readily-available properties.

Thanks for reading!
Brad

[Brad Turner]

@Jaron Walling
Thanks for the reply. Glad to know I interpreted it right. I had a long talk with my partner this morning about the situation and we're going to have to accept it and consider financing rather than all-cash on the cheaper stuff. It at least opens up our options. He was able to get some leads on some angel networks so maybe that will make more sense.

I'm going to put in some more leg work into those off-market properties, see how that goes.