All Forum Posts by: Carlos Ventura

Hey @Carlos Ventura, appreciate you asking this. Nothing wrong with starting out with a BRRRR. My first home was a BRRRR that I house hacked. Never made it to the refinance part, we sold it and are now house hacking a 4plex. I wouldn't say no to starting with a BRRRR. No matter what strategy you do, you're going to be green and stuff will come up unexpectedly.
House hacking is great because you are leveraging your living expense and can get started with very little (3-5% down payment). Here’s some advice I would give:

1. House hacking will force you to learn some trade skills unless you want to pay premium for renovations/rehab. If you can do it yourself, you’re going to save a lot. But if not, you pay for a good quality contractor, and that may mean you have to wait for them. Don’t go cheap, don’t cut corners. I recommend all first time investors to do this, it’s not for everyone, but you lower your expenses and you learn a lot more this way. You may find out you don’t ever want to swing a hammer again, or that you are pretty good at it and want to do it again.

2. If you can’t find something to owner occupy, find someone who has experience, a mentor, and partner with them. The amount you’ll learn from that deal will be more than any book or podcast episode will teach you. Even if you don’t make hardly anything from the first deal, the value you’ll gain from this partnership is worth a lot more than you’ll recognize. It can develop network opportunities, great relationships, better reputation, and more deals down the road. Don’t be greedy, be hungry to learn.

3. Be Ready to Pivot. Sometimes deals change unexpectedly or something comes up that may require you to shift gears and look at your deal differently. As mentioned earlier, my first deal was going to be a BRRRR and I saw a 4plex on the MLS and took my shot because I wanted to househack and save money. I went from paying $1250/month + utilities to earning a few bucks and refinancing +$70k after a year of owning the 4plex. Just be ready and always look at multiple strategies with a deal. You may find that you need to bring on a partner, or that it makes for a better flip, or you want to wholesale it. Just be ready. Cashflow will come, it just may be through a different deal.

Hope that helps! Let us know if you find anything or go under contract on a deal 👊

@Carlos Ventura you said you're a beginner, but BRRR'ing is an advanced strategy. Doing a BRRR with no prior REI experience is a bit like trying to surf a 50 foot wave before even learning to swim--the chances of success are low, and the chances of disaster are high. And, as @Nicholas L. mentioned, BRRR'ing is very difficult and pretty risky in the current market (even for experienced experts).  Therefore, I would suggest starting off with a strategy that's more in-line with your experience level.

Fortunately, there are other strategies that can be just as successful (or more successful) than BRRR'ing, but which are much more beginner-friendly.

In my opinion, house hacking (a single fam or small multifam) is the single best way for people to get started in real estate investing.

Why? Because, house hacking can produce great financial returns, it teaches you essential RE investing skills, but (compared to more advanced strategies like BRRR'ing or wholesaling), it is comparatively lower risk, simple and beginner-friendly (and therefore has the highest likelihood of success).

More specifically:

1. A HH can produce great financial returns. A HH can substantially lower your living expenses, while creating cashflow, appreciation, mortgage pay down, and tax benefits. A HH can also involve opportunities to force appreciation and/or rent (e.g.; by adding an extra bedroom in a previously under-utilized space). When executed correctly and repeatedly, house hacking can be very lucrative, and there are multi-millionaires who built their fortunes on repetitive house hacking! Although it's a strategy that's good for beginners, there are plenty of very experienced RE investors who continue to HH, because it's such a powerful strategy.

2. A house hack will teach you the essential skills you'll need to succeed in RE investing. With a HH, you can learn how to analyze properties & markets, how to find an investor-friendly agent, how to spot value-add opportunities at properties, how to engage in a strong due diligence process, how to screen tenants, how to manage the property, how to build a network of contractors, plumbers, electricians and other pros, how to manage the book keeping of the property, etc., etc., etc. If you want to succeed in RE investing, getting this experience will be critical! In my experience, a HH can provide incredibly valuable lessons that no mentor, real estate course, book or podcast could ever teach (though, I'd still highly recommend reading up on relevant RE resources, listening to podcasts, etc.).

Plus, if you decide to do one of the other strategies in the future (such as BRRR'ing or out of state investing), you'll be much more prepared to do it if you have a few HH's under your belt--a ton of the lessons you'll learn from a HH can be used to succeed in other areas of real estate ...in fact, I'd say that a HH should be a necessary prerequisite to the more advanced strategies (like BRRR'ing or flipping) for most folks!

3. Compared to other strategies (like BRRR'ing, wholesaling, etc.), HH is relatively simple and lower-risk, and therefore has a higher chance of success. I always use this analogy: would you tell a beginner skier who has zero experience to ski a double black diamond (the most advanced terrain) for their first run? (obviously, no; a beginner could easily get themselves killed on double black diamond terrain!). Beginners should start off on beginner terrain, where they actually have a chance to learn and succeed. A house hack is like that beginner run (but BRRR'ing, wholesaling, and out-of-state investing are more like double black diamonds).

The fact of the matter is: real estate is often a high-stakes endeavor, and the more advanced strategies (like BRRR'ing, wholesaling, flipping, out of state investing, etc.) can easily bankrupt a beginner when they're executed poorly.

Now, having said all that, house hacking is not necessarily easy (if it were, everyone would do it!)...it's just easier than the more advanced strategies...House hacking still takes significant due diligence, skill in analyzing the market and the property, time and effort to learn about tenant screening and property management, the ability to anticipate appreciation/depreciation trends, etc., etc., etc....and even with lots of skill and preparation, things will still go wrong (vacancy, plumbing leaks, bad tenants, etc.)--but that's the nature of the game. As James Brown sang: you gotta pay the cost to be the boss.

Good luck out there!

Hi- @Carlos Ventura love it! If you are not already a part of local meet ups in your area, go join some! You will most definitely meet people with leads/ wholesalers at those. Good luck!

Make sure you are buying 70%-repairs. Bank will give you 75% LTV but you want to pack 5% in there for the unexpected, and trust me there will always be unexpecteds.

Get multiple estimates from contractors, and the cheapest isn't always the best. Also when creating a repair budget, make sure you leave an extra $5-10K at minimum incase you need to go over budget.