All Forum Posts by: Jonathan Palumbo

To get this started I will give my current situation. I am a young investor with my 2 other brothers, we are currently investing in Kansas City, Missouri. We have now 3 properties under our belt!

Property 1:

Purchase price - $73,000

Mortgage - NONE (Paid Cash)

Monthly Rent - $875

Monthly Profit - $580

Property 2:

Purchase price - $65,000

Mortgage - NONE (Paid Cash)

Monthly Rent - $950

Monthly Profit - $750

Property 3:

Purchase Price - $107,500

Mortgage - $80,625

Monthly Rent - $1300

Monthly Profit - $435

Current Cash Available - $110,000

Current Available Equity - $96,500

Cumulative Total - $206,500

The available equity was a HELOC loan that was given at 70% LTV so those are real numbers, they would be from property 1 and property 2.

The reason im typing this is because I would like to know if there were any builders that could give a rough estimate of building cost per square foot in Kansas City area or suburbs. The builders ive tried talking to are mostly in communities so they do not build on land that was not theirs unless it was $350/sqft!

This could be a reasonable price but this was only from 2 companies, but would anyone else who is a GC or home builder please let me know about building price per square foot in their area or in Kansas City area? Anything helps, per this example we could say:

A single family home that is not builder grade but not luxury so in the middle being 1,600 sqft, 3 bed, 2 bath.

Also a:

duplex that is 2000sqft vertical build that is identicle layout on floor 1 and 2. each unit would be 1000 sqft and 2 bed, 1 bath.

To note, the loan on property 3 is a DSCR loan because there is not 2 years of stable income from me because I am still in college.

If there is anymore info that could be needed please let me know.

Once again I would like to hear about building costs in any of your locations, its all a great help!

Thank you once again!

0 Votes

Hello all,

Just looking through a number of home builders and developers webpages to see what types of homes they build, and from what I can see, most of them in Kansas City MO are just building 2,600 SF or bigger. Im wondering if anyone knows of home builders that are investor friendly, and in my case I mean instead of the highest quality, large square feet, and top tier designs, im looking for a basic floor plan, middle quality, and smaller square feet. In my case give or take 1,000 SF for this said home. 2 bd 1 ba is the ideal floor plan of the home. I will buy the land and can get a seperate company to rough in utilities. The land in question is a 50' wide x 100' long plot of land in south Kansas City. Let me know if anyone has recommendations of home builders.

Thank you!

0 Votes

Kansas City, Missouri

Quote from @Michael Smythe:

@Jonathan Palumbo not seeing anything here about cashflow?

Typically, cashflow is what implodes portfolios.

Did you mean in my cashflow currently or the cashflow im hoping from the property.

This was a hypothetical situation but in this case with kansas city market the cashflow from this property would be 300/m while my current cashflow is 580/m

0 Votes

Great. Thank you!

0 Votes

Quote from @Julie Muse:

Hey Jonathan,

First off, let me just say, you and your brothers are doing something incredible at such a young age! Being so forward-thinking and having already dipped your toes into real estate is amazing. Kudos to you all! Y'all are like the real estate version of the Three Musketeers – all for one and one for all!

Understanding the BRRRR Method

The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is a fantastic way to build a real estate portfolio. Let's break it down with your example:

Buy: You purchase a single-family home (SFH) for $100k. Easy peasy, right?
Rehab: You spend $50k on renovations. Time to channel your inner HGTV star.
Rent: You rent out the property. Let's say after renovations, your property can be rented at a higher rate. Hello, passive income!
Refinance: You get the property appraised, and it’s valued at $200k. The bank typically offers 70-75% of the appraised value. If they refinance at 75%, you get $150k (75% of $200k). This part is like magic – watch your money come back to you!
Repeat: You use the $150k to pay off your initial investment of $100k purchase price + $50k renovation, essentially getting all your invested money back to move on to the next project. Rinse and repeat – like doing the laundry but way more profitable.

So, yes, if your numbers work out perfectly, you get your initial investment back and can use it to fund the next project. Your profit would be in the equity you’ve built and the cash flow from renting the property.

Steps to Scale Your Portfolio

With $210k in cash and already owning a rental property in Kansas City, you’re in a strong position. Here’s a plan to help you scale:

Find the Right Deals: Look for properties that fit the BRRRR model. Focus on areas with good rental demand and potential for appreciation. It's like hunting for treasure – except your map is Zillow.
Network: Leverage your connections in Kansas City. Network with local real estate agents, wholesalers, and other investors to find off-market deals. Think of it as making new friends with benefits – of the real estate variety.
Leverage Your Cash: Use your cash for down payments and renovation costs. Once you've completed a BRRRR cycle, refinance to pull out your initial investment and reinvest it. Keep that money moving like it's on a treadmill.
Build a Team: Have a solid team in place – a reliable contractor for renovations, a property manager if you don’t want to self-manage, and a good lender. Your dream team – like the Avengers, but for real estate.
Educate Yourself: Keep learning. Real estate is all about continuous learning. BiggerPockets, real estate books, and podcasts are great resources. The more you know, the more you grow – like a well-watered plant.

You're already on an impressive path, and with the BRRRR strategy, you can scale up quickly. Keep pushing forward, stay focused, and don't be afraid to take calculated risks.

You and your brothers are truly inspiring – keep up the fantastic work!

Best, Julie Muse

So in the case where im in for 150K on initial investment + renovations and I pull out the 75% value to give me 150K and use that to pay off the initial investment + Renovations im technically break even in that case, but my real profit is the 50K equity left on the property?

2 Votes

Quote from @Joehn B.:

you cash-out refinance after title seasoning and get 70% of ARV (200k) back so in your example you would get 140K back and have 60k in equity left in the property. You need to do the math carefully and make sure it cash flows under that new loan (70%ARV) at your new rate. that 140k is what you go use for downpayment on the next deal.

So instead of using any of that 140K to pay off renovations should I just let the monthly cashflow pay for the loan used on renovations, or should I just use cash for renovations and have the only loan in the whole deal be the refinancing?

1 Vote

Hello all,

I am a 21 year old college student who has been very into real estate investing as well as pursuing a degree in Construction Management with a focus on residential real estate. Getting right into it, I have been seeing many posts about people doing the BRRRR method and all of it is very good to soak in. I am really wondering if someone can layout how to jump into it and go about completing the BRRRR method. Some questions I have are, and this is an example and not real, if I buy a SFH for $100k that has an ARV is $200k, assuming i use $50k on renovations, is the remaining $50k my profit to move onto the next project with or am I getting this completely wrong.

Something about me that would be helpful. My 2 brothers and myself have about $210,000 cash in the bank waiting for a real estate project. We have a cash purchased SFH in Kansas City MO that we got for $75k cash, that rents for $875/mo (After management fees, taxes, and insurance, we profit $580/mo). Myself and 1 of my brothers are in college, while the other brother is 1 year out of college making approx. $70,000/ year pre-tax. What should be our steps to scale the cash we have into giving us a good portfolio.

Thank you! If im missing any info I would be happy to add.

5 Votes

All Forum Posts by: Jonathan Palumbo

Jonathan Palumbo has started 3 posts and replied 7 times.

Post: Getting into Real Estate Development

Post: Looking for Investor friendly home builders in Kansas CIty MO

Post: How fast and how can I scale with BRRRR

Post: How fast and how can I scale with BRRRR

Post: How fast and how can I scale with BRRRR

Understanding the BRRRR Method

Steps to Scale Your Portfolio

Post: How fast and how can I scale with BRRRR

Post: How fast and how can I scale with BRRRR