Originally posted by @Brian Van Pelt:
Buy, Renovate, Rent, Refinance, Repeat (BRRRR) for Investors has always been the Refinance portion. I've never understood the need to pull all the equity out of a property until their monthly cash flow is approaching zero.
One of my properties is a Condo with a positive cash flow of 1200 per month. It makes no sense to have 4 properties bringing in the same income as one, especially if its bought at the height of the real estate market.
The last housing document, i lost count of the number of investors who went bankrupt or just plain lost all of their properties when their portfolio unzipped because of 1 or 2 properties that they could not rent and were upside down on their portfolio.
Anyone who considers BRRRR really needs to read AND understand @Brandon Sturgill post on BRRRR
Agree it doesn't make sense to have 4 properties to generate the same cash flow as one. I would only lever up if the same cash invested could get me significantly higher cash flow out of 4 properties (so I'd want to see a step-change in CoC return, from say <10% to >20%), after taking into account all costs including appraisals, refi, etc...
This means:
1) all properties need to be acquired significantly below market (hard, but not impossible) & acquisition should be all cash so you're not paying interest during a potentially lengthy rehab
2) rents need to be high relative to acquisition price (1.5-2% rule, also hard, but not impossible if you did well in #1)
3) you need to budget for reserves and have access to non-bank lending to scale (both need to be incorporated into your business model for long-term viability)
If one can't do all 3 of the above, it may be better to buy rather buy & hold with low leverage in a market likely to appreciate.
