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
