All Forum Posts by: Ethan Brackin

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If you want to activate it, you can simply log in with your BP Account - Activate RentRedi Perk

I am not in favor of growing via cash-out refi. If you just borrow more money, you are getting deeper in debt. As you mentioned, you have to eventually pay it all back, with interest. There is a healthy amount of leverage, but the whole point of investing is to grow equity, and eventually a return on that equity. If you constantly cash-out refi you reduce equity and cash flow.

That's why I am trying so hard to make the point that you need a business that generates cash so you have money to in-vest on top of what your W2 is making. You don't need to buy a car dealership, it can be a side hustle or an online business.

If you try to get more rent than fair market, you will rent to desperate tenants, who got rejected everywhere else. We do the opposite. We do everything we can to attract the best tenants possible and have them stay for many years. That's why our rehabs look more like flips and we even finish basements as we target families with kids who want to get into the school district.

The most important thing on your first deal is to keep the risk low. You do this buy buying a quality asset in a good enough location. And by not biting off more than you can chew for the rehab. A cosmetic rehab is still quite a challenge for the first time. Paint, carpet, light fixtures, maybe some doors, plus odds and ends - you'll learn a lot! Conventional financing will work for this just fine. Yes you will need a 6 months seasoning period, but by the time you got the work done, a tenant moved in - the 6 months will be almost over. HML is expensive, better to use private money from friends or family. Once you got the first deal under your belt, you can start thinking about the second.

I did alright on my first 3 rehabs, but got over-confident and #4 was a massive mess and turned out to be a money pit. I took on too much. I remember looking at the $60,000 bank account for the rehab at almost zero, still checks to write and still more work I had not even scheduled yet. I felt physically sick and had to go tell my wife.. The good thing is that rentals are very forgiving and I eventually recovered and years later it even started cashflowing. 

Hi Ethan, I have been BRRRR-ing in Milwaukee for over a decade and after 2016-2018 or so I had to work increasingly harder to make deals work (much more complex rehabs: mold, foundation issues etc). Today our inventory is so low, that sellers don't have to give me 50% discount because of poor condition. They will find a first time home buyer that will be happy to pay close to what the neighbor's house (in great condition) is worth. If you can find one where you get the price to match the work needed, it is still one of the best strategies! But that's a big IF in 2025.

The approach that I take now is to let market appreciation and inflation do the heavy lifting for me. We have seen prices go up 8.2% in 2024 here and why would I work hard for half a year to do not that much better, if I can just do nothing instead?

Money, time and energy are interchangeable in real estate. If you don't have much money, but you do have time and energy, you can use that to find a unicorn deal that will still work with BRRRR.

Paul?

Ethan, good question. I used my comment more as a generalization then practical application. I am not saying that a BRRRR's always have negative cashflow, that isn't the case. My point is that I see many people trying to find deals where you pull as much equity out of the deal as possible and still get cashflow. I just don't see where the properties in my buy box allow for that option. I need equity to cashflow, sometimes north of 30% down and I don't feel that is a bad thing. I just want to temper expectations of new investors that are being told that you can buy a property with 5% down and generate cash flow, or they can flip a house pull out there entire investment and cash flow. I feel if there is too much information out there like that when new investors start analyzing deals and they don't see the numbers work like many describe it discourages them to the point of passing on good deals or passing on real estate investing all together.

I am still new and didn't get started until 2021.  I only have 5 properties and know I have a lot to learn but from my experience to do this takes cash.  I have taken a more traditional route with conventional financing and a high savings rate from my W2 vs. creative financing, house hacking, 1031 exchanges, and other methods.  My main point is two fold, you can invest in real estate in any market at any time you just might have to change your approach, and don't think that there is a magic bullet that you can do this with no cash.  This is a capital intensive business.

Marcus, you are just south. I invest in the Sheboygan area. I agree with your assessments. So much content I see about ways to put as little money down as possible or doing the BRRR method so you can purchase a property and then pull out all the equity so after it's rehabbed you can get all your capital back out. I am not trying to knock those approaches and obviously they have worked great for many people but I feel the market is different then it was in the past. Personally I am not finding deals that could support those strategies in my market today based on my current skills and available time. If I took that approach I would have negative cashflow which isn't a good sustainable business model. I am okay with limited cashflow while I'm in my prime W2 working years but not negative. My business still needs to sustain itself. In my opinion that leaves me with two options. Sit back and wait for the market conditions to flip to where those strategies would work for me, or adapt to the current market. Sitting on the sidelines for me isn't an option. Knowing I'll be holding onto these properties for the next 30 years plus I have no issues with my strategy. I also am not looking for cheep properties in bad locations that could turn a quick buck. I want properties that I am proud to own and if I was personally looking for a rental I would be willing to rent. Obviously that isn't a requirement for most to buy a property but it's something that's important to me. Because I purchase properties like that I feel we attract tenants that we can relate to which helps us on the property management side with communication and working through issues.

From what I see and my experience, it is a bit hard to find one that is going to Cash Flow positively right away. You will have lots of expenses with the formation of a new LLC, lawyer fees, costs to start up payroll for this company, workers comp, new insurances, immediate repairs, etc. But you will be getting cash inflows that may reduce that burden.

You will have to stabilize the turmoil that comes with drastic change, and changes you implement to increase efficiencies. Where as a Turnkey rental has some of those same charges but can be rented and be a bit more passive, depending on the route you take. 

I would suggest working in your new business 6-12 months before you are able to see trends and find who can properly lead so you can step back from operations and focus on growth. 

Cash flow for businesses require more time which usually means higher returns in $ amount, % of CoC Return is more difficult, and keep in mind your time. my rental takes a hour a month and maybe cash flows $100, $100/hour is nice, but took $60k. My Bookkeeping is $65-$70/hour and but cost $1,000 to make it operational. I spend lots of time to automate and duplicate reports in order to save time to increase my efficiencies that help me increase the use of my time. I can't do anything to my rental to increase efficiencies in creating more income until it is vacant or the market decides I can.

Businesses will require workers, that require leading, and that requires more patience and more hard decisions/conversations to make. But can you find additional revenue sources for a business, yes. Sometimes it's not easy or cheap for Real Estate. 

For finding businesses, I use BizbuySell, Crexi, LoopNet, and Facebook. 

Good luck! I have interest in the Laundromat world too so let me know how this goes for you!

Hi Ethan...I have the best resource for you.   You need to connect with John Barry.  He has owned and operated 4 laundromats and would serve as an exceptional resource for you as you begin to explore investing in. Here is his contact information: 

[email protected]