All Forum Posts by: Anthony Torres

I live in Middlesex County, about 30 minutes from Boston - I couldn't make the numbers work locally so I am investing out of state. If that's an option for you, check out David Green's Long Distance Real Estate Investing book for more info. I found it a great read! It'll really open up your options if you can get past some of the unique challenges. PM me if you would like to chat about this more. 

@Sean Sloop You are absolutely right. I just added that in and it offsets a lot of those costs. Thank you!

@Bob Woelfel

Putting my own money up is free so I think it's appealing to use as much of my own cash as I have available. Is there any reason I should try to go in with more Hard Money? (Keeping some cash liquid for emergencies of course)

BRRRRing in an LLC and getting a commercial lender is a great idea. What kind of terms do you usually see at the refinance in this scenario?

I would say that whichever scenario generates the higher Cash on Cash Return would be the better strategy for me. If the $15k BRRRR deal doesn't cashflow but the $30k traditional has great cashflow and takes less time, I'm thinking I'd rather go with the latter.

@Jim D.

Absolutely. It is more appealing than the alternative. What Cash on Cash Return would you expect to see once the deal is done - for the money left in compared to the cash flow. 

I don't have any sense of what cashflow should look like after the refinance. That part is usually glossed over.

How are you able to refi in 6 months?  Is it just about finding the right bank?

Great tips! Thanks so much.

Thanks @Jason D. I got it from a BRRRR post on BP. I see the difference.

I have been running the numbers of an example BRRR to help get my head around this investment strategy and there are a few things I am confused about.

Here's a theoretical deal:

(ARV * 70%) - Rehab costs = Purchase price

($150,000 * 70%) - $30,000 = $75,000

But what about closing costs, loan costs, refinance costs? 

One of the suggestions I've seen is to get a hard money loan because the condition of these houses don't usually qualify for traditional financing at time of purchase. If I put 25% into the deal, $26,250, and take out a hard money loan for the remainder, $78,750.  The loan will likely cost around $11,000-$12,000 - assuming 15% for the year in some combination of interest and points. Since there is usually a 1 year seasoning period needed prior to refinancing, the loan would be needed for at least the full year.

Let's assume closing costs are $3k.

Purchase price + Rehab: $105k

Closing costs: $3k

Loan cost: $12k

...gives a total cost of $120k

The appraisal comes to $150k as expected and with the refinance, we are able to pull $105k out (70%).  

After we pay the total costs, we  are in the hole for $15k. 

I am under the impression that the appeal of a BRRRR is that you are able to pull all your money back out. Cashflow is assumed to be low.

It seems like a lot of work to leave money into a deal and not receive much cash flow. 

Please help me understand where my logic or calculations are off.  Thanks in advance!

@Robert Ellis Sending you a PM. Thanks! 

Grant - My goal is maximizing cashflow. This is our only investment property, currently. I'm thinking that I could sell this property to purchase a better cashflowing property without having to put in any additional cash. I think a multifamily would be the next step. I'm not sure if I'm over extending myself or if this is a "grass is greener" situation.

Joe - We didn't live there long enough to do a section 121. We would do a 1031 if we were to sell. We would want to reinvest anyway.

LOL, Tim. Thanks! It isn't the house we currently live in. I'm thinking that the numbers work in the favor of selling it so that we can tie up a bigger investment. I'm wondering if there are any things I'm missing on my pros & cons list.