All Forum Posts by: Aaron Murphy

thats awesome! sounds like your a good example of what i mentioned saying that BRRR isnt dead. If you are doing BRRR in markets like DC its further demonstration that these narratives are not accurate.

Thats not my model and homes at that price point havent penciled out for me but im very much doing BRRR in my market with properties that do pencil. we add ~50k-60k of equity per BRRR on properties around 200-230k ARV

cool break down thanks for sharing! This seems to be breaking down new construction and is a national average so kind of hard to read into this what it means in general but I would not expect a 665k new construction house to be my target for a rental property. 

Im a medium sized operator - 46 units- and my typical deal has an ARV from 200 to 230 when its finished. Wich goes back to my comment to the initial poster. people who want to buy homes in DC and top markets like that are the ones saying BRRR is impossible right now. Im not even sure that it is impossible in those markets but the main issue is that BRRR isnt working where they want to buy not that BRRR doesnt work.

you are probably feeling like BRRR doesn't work because you are trying to turn a 600k house into a rental. It would be hard to cash flow on a 600k house that has 3600 in rent regardless of the broader economic situation going on in society.

i find that when someone says BRRR doesn't work anymore they end up meaning it doesn't work well for the specific types of real estate that they want to buy. And I've got no qualm with someone saying they aren't doing BRRR anymore but the bolder "brrr is not effective today" is in my view not very accurate. 

 Tim - This was my understanding as well but a city inspector mentioned that i made need a use and occupancy permit even if the property had not been declared vacant. Do you know if there is somewhere that I can search U&O permits specifically? 

 Joe- I heard that interior rooms with no windows but that do have a skylight are "grandfathered in" in Baltimore as bedrooms.  Do you know how I could research if this correct or not? I have been looking into what something needs to count as a bedroom but nothing about grandfathered exceptions has come up. 

also I am am a newer investor to Baltimore and have purchased 10 rentals there over the past several years. If you are in the area still and go to any of the meetups perhaps we will run into each other at some point. 

Rich- I am doing some research on quick books/stessa/ and rentastic as options to manage by income and expenses . The primary use is for rentals we have 11 and then we are working towards doing some flips, BRRR's, and possibly STR deals. You mentioned here that Stessa wouldn't be good for 10+ properties. would you mind expanding a little more on why that is?

I've been searching for negative reviews and most of them just center around the font size being small or not liking connecting bank accounts etc. I haven't seen anything about it scaling poorly but if that's the case id like to know that before I set it up. What was your experience? 

Aaron 

@Kenneth Gore yeah this is a pretty crazy market. for me the goal was always cash flow focused so if your looking at an equity spread as the main focus you may be right to hold off. 

I have purchased almost all of my properties basically very close to the appraised amount. I do plan in the future to work with wholesalers and find off market deals etc . but if a property meets my criteria from a cash flow and Cash on cash return perspective i don't even mind being right at the appraisal. In the case of my land contract I think I technically over payed. But they basically gave me a 30 year seller financing at 5% wich worked really well from a cash flow perspective so I just did it. I think at the time(2018)  it was worth about 120, I paid 130 and got the seller financing and today its worth 195. 

maybe you could look for a fixer upper if you want to have an equity spread? 

@Darian Richardson , @Kenneth Gore

Kenneth responding to this post caused me to be reminded of it today. Which is cool because on 8/31/2021 I will be closing my 10th purchase taking me up to 9 rental properties and 1 personal residence. So it was really neat to be reminded of how much consternation I had around this issue at that time. 

One difference in my original question vs Kenneth's is I was concerned primarily about qualifying for the additional loans where you all may be more focused on saving the down payments. I was a single guy house hacking in a basement of a house so i felt like the down payments themselves was just a function of how long it would take me to save them. When I wrote the post I felt a bank wouldn't qualify me for a second loan etc based on income. 

My biggest point of feedback to the question based on my Journey is the two things below. 

1. just to figure out how to get "the next deal" and keep learning. if you do that incrementally at each step you will know more so the next one will become easier. As an example of this i got my second deal by going to a less expensive market an hour from my first property. There i was able to put 25% down and that wasn't that much more than the cost to house hack in the market where my first deal was. Then my 3rd deal was in that same small market but by talking to folks i ended up connected with as guy who finances properties to folks up there using land contracts and so the 3rd deal didn't require qualifying based on income at all. Each of those learnings was a big improvement on my original concept. 

2. Understand that things will change dramatically from what you currently see as the parameters of this decision. I cant say how much they will change for you but i was 23 when i wrote the original post and I was about 2 years into a career as a software sales person. Here are some things that changed: 

a)interest rate on my second deal was 4.75% the deal i am buying end of month is 3.125% so the interest rate climate changed.  

b) after buying the 3rd property i stopped buying real estate and committed to paying of 90k in student debt. I expected that to be a 2 or 3 year process. but in the process of doing that something inside of me changed and I saw my income from sales increase 2X over the years 2019 and even 2020, i expect this year to push it even higher. This allowed me pay off the debt in 9 months but then it has also fueled incredible portfolio growth AND its made income qualification a non issue for me in getting to the 10 loans. 

c) I am now married so even after we close end of the month and get to 10 mortgages I will still be able to buy 10 more in my wifes name so now I can do 20 rather than even being limited to 10. 

My goal in explaining those things isn't to brag but to just explain how in my life the path has been super non linear and full of unexpected things. The whole time I just kept reading and learning and trying to plan the "next best thing" and that has compounded from the time I wrote this post. So don't worry about figuring "it all out" at deal 2. just figure out deal 2. then figure out deal 3. and then if you cant do deal 4 save some more money and look for another way. 

Good Luck. 

@Nate Fleming hey that’s awesome ! Thanks for sharing . It sounds like by nailing  down a super concrete view of what the construction or renovation costs will be you got more confidence in pulling the trigger . 

That was a big unknown for me and for sure one of the reasons why we slowed down . I think doing light renovations on some of these single family rentals we are buying now working with contractors etc will up my knowledge base . Then flipping with someone that knows the construction side in and out will up it even more and at that point hopefully I’ll know my construction numbers in and out as well .

@Michael Rodriguez I did not end up moving forward with the scenario. We had a property under contract in March and I got cold feet because it seemed like it was possible we couldn’t even pull permits due to Covid . Within 3-6 weeks of when our closing would have been an e-permit system emerged and folks were able to pull permit even though the permit office was still closed but it felt like a big risk to go forward not knowing that and while Covid was ramping up . I was also going into the deal with less than ideal cash reserves so I had enough to fund say the 130k build but was relying on making more job income to replenish reserves while I was doing that . I’m in sales so I was worried that that income might dry up mid project . 

Before I made that decision we had decided to move forward with the more extensive renovation to match the comps . After digging in further to the numbers finding a lot for the new build actually raises the cost of that option more than I expected . 

So I exited that deal and regrouped and now we are executing a less interesting strategy Wich is to buy a slew of homes in Baltimore that I can rent out section 8. (That’s the Covid ptsd in me lol )  . We have one closing on the 30th and expect a ratified contract on a second property today with closing first week of December . 

I am at the same time working with a mentor of mine to build out what partnering on a flip in a more expensive market like suburban dc would look like . If we can put that together then in early 2021 I’ll try my hand at flipping using hrs money and if there’s success I’ll use that to fuel more purchases .

I’ll still brrr one day but Probably out in the future . Let me know what you end up doing !