All Forum Posts by: Michael A.

If I were to do it again, I would have owner financed my properties instead of renting them out. Can typically get 10% over asking and more cash flow every month with cash in hand. 

Paid 48k for a SFH (with a 401k loan-lol) and dropped 50k in the rehab, so all in for 100k. Did a cash out refi 5 months ago and the lender gave me back 168k. Rent is $1500/month. I took that 168k and bought 3 more houses with the cash in the last 3 months. Total net cash from all 4 houses is $3900/month after all my expenses.

Quote from @Michael A.:

Looking to hear from investors who have had success with BRRRR. Also, if anyone has used the BRRRR method to acquire an apartment complex.

Bought a property for $39k, spent about $70k fixing it up, Re-Fi'd and pulled $105k out.  So I was only in the deal for about $5k.  Rents for $1400.  Bought it about three years ago and I'd say it would probably resell for $180k now.

The rehab was a nightmare, so I'd advise doing something just needing cosmetic repairs instead of the complete gut job we had on your first time, but it was still a successful BRRRR in my opinion.

@Michael A.

i see a lot of posts on BP where people get confused because they try to calculate using conventional financing like you did.  if you use financing, you pay off the loan you took out.

so in an example where you buy for 100K using hard money with, say, 20% down and 40K rehab in your own cash, appraises at 200K:

-75% of 200K is 150.

-use the 150k to: pay back 80k loan, 40K rehab, and 20K down payment to yourself... but there are also holding costs, like insurance and utilities; financing charges on the refi; and interest on the HM.  these costs are substantial and always overlooked.

-HM is really expensive.  you'll pay points up front to get the loan and then monthly interest payments.

and... if you buy using conventional financing... it probably doesn't work as a BRRRR. you can't go on the MLS, find a random property, buy with conventional financing, and BRRRR. it's not going to work.

and there aren't too many rules on your questions. BRRRR works on any property of any type, SFH, small multi, big multi. the difference between SFH and big multi is that the ARV of the SFH is going to be based on comps, and on big multi it will be based on cap rate.  so on a SFH the thing that matters is boosting the ARV via the rehab, which you hope will increase the rent to cover the debt service when you refi.  if you can't boost the ARV it's not going to work.

for awesome deep dives from a pro, watch Tarl Yarber's YouTube videos.  he gets way into the weeds on the numbers and doesn't omit anything.

hope this helps

Quote from @Michael A.:

I'm trying to understand the different strategies using the BRRRR method and how it generally works. I'm hoping some investors can contribute to the discussion and help answer my questions. Thanks.

From what I understand, it involves getting money from a hard money lender to buy and fix up a property. 

For example, 

hard money loan of $100k

Purchase price $200k

20% Down = $40k

$60k in fixing it up. 

New appraised value of $400k. 

Rent it out.

1: from here would you cash out refinance or sell the property to pay back the loan? 

2: If you cash out refinance let's say 75% of $400k, what do you do with the left over money after paying back the hard money loan. Do you use the left over cash out money to buy another rental? Or do you do the BRRRR method again this time using your own money?

3: Is the BRRRR method best for 2-4 unit properties or single family?

4: How many months should the BRRRR method take?

5: Where do you find a good hard money lender? Bigger pockets? 

Definitely recommend reading BRRRR book written by David Greene.

Stopped ready after the first few lines...

The BRRRR method will generally go like this

- Buy in cash (whichever manner you choose) - Let's say purchase price is 100k

- Rehab in cash (whichever method you choose) - Let's say 40k rehab

- Rehab the house, get it rented out, and wait for "seasoning" (generally 6 months, although there are many different loan programs available here as well)

- Refinance the house (generally a cash out refi up to 75% LTV) Hopefully you have bought under market and can get most of your money back out.

Now there are nuances to almost every part of it and this post could turn into a blog over the different lending options. You'll find this is a cool method but works only on select properties where the rent can cover the cost of the mortgage (where the mortgage balance is 75% ARV) plus any additional cashflow you require.