All Forum Posts by: Mike Brown

From what I understand, the tenant pays for all maintenance, insurance, etc. But what does the investor pay for? If a new tenant comes in, who pays for the remodeling, new roof and such?

Say I buy a $100k property, put $40k of my money in for the 25% down payment, rehab, holding costs, etc. The ARV comes out to be $150k and the bank gives me 75% LTV, which is $112.5k. I pay off the original $75k loan and am left with $37.5k to repeat (we'll just say $40k for this example). So then I do it two more times for property #2 and #3 without using my own money.

So now I paid off the original loans for the 3 properties (each valued at $150k), but still have three new $112.5k loans because of the refinance. Now my question is, how much equity would I own total right now after BRRR'ing the 3 properties? Would I just simply multiply all three properties and then subtract with the new refinanced loans ($450k - 337.5k = 112.5k equity)?

Let's say I'm in the midst of Ch. 7 bankruptcy and I have a nice paying job that allows me to save up about $30k per annum for a rental property to BRRR out. Saving up for the down payment/rehabs/closing costs/etc. wouldn't be an issue here, but I'm more worried about how I'd get a loan to cover the rest + do a cash-out refinance. And perhaps there would be more situations that would be difficult that I haven't mentioned yet.

So how would it work? Is it still possible to do BRRR while in bankruptcy?

With the BRRR method, it seems it's a lot easier to accumulate equity than cash flow. For ex., say I buy a $100k property, ARV is $150k, bank gives me 75%, which is $112.5k.

So if I refinance, my monthly cash flow goes down but I get that $112.5k, correct? But I prefer cash flow over equity because I like that steady stream of monthly income coming in. I also don't feel comfortable relying on equity alone if the home market crashes. So my question is how can I turn that big load of equity into a steady stream of cash flow? 

Another question I have is, is it possible to invest that $112.5k into an actual business, like maybe a gas station or store if I find a good opportunity? Is that legal?

Any education for this newbie would be very appreciated!

 Thanks, I understand it more now. It seems like a great method to build equity, but is there a way to turn that equity into higher cash flow? I feel that cash flow is more important to me than accumulating equity.

For example, say you buy an $80k home with $20k down and spend $15k in renos. It goes up to $125k after a year of "seasoning", which is an increase of $45k. In newbie terms, what is the process of using that $45k increase to pay down the original mortgage balance? The reason I want to do this is so I can get higher cash flow from the properties.

Regarding the Refinancing part of the BRRR method, would it be better to use the cashout refi to pay off the remaining balance of the previous home for extra cash flow, or use that money to buy another and build equity?

For example, say you buy an $80k home with $20k down and spend $15k in renos. It goes up to $125k after a year of "seasoning", which is an increase of $45k. Could I get that amount from a refi to bring the loan balance down to $15k or so, and pay it off faster for extra cash flow? Also, this might be a dumb question, but if I take out 45k equity in this scenario through a refinance or something, wouldn't that mean I'd have another mortgage payment to make even if I pay off the original loan?

Say you have $60k leftover every year to invest in rentals. Assuming 25% down, that's a couple homes valued at $120k a piece that one could invest in. I'm sure most banks would allow you to have 2 homes financed; however, this would add up in the longterm and I'm not sure banks would loan you any more money when you already have 15 or so rentals under finance. 

How does this work for those with plenty of money to invest? Do they just move on to bigger investments like commercial?

How do you figure out what specific parts of the home need to be rehabbed to efficiently get the most value increase out of the home? Does the contractor figure this out or do you need to tell them specifically what you want renovated?

Also, do you hire multiple contractors when doing BRRR for multiple properties at the same time, or just one? For example, assume I want 7 properties to be renovated within a year.

Thanks

Awesome job, Brandon. Question, did the bank give you the $68,800 all at once? How long did they take them to lend you it? Also, what was the $3,500 deposit for?