All Forum Posts by: Natalie Klesaris

Hey @Natalie Klesaris congrats on your first 4 doors! 

Your question is pretty open ended, what I qualify as a BRRRR might not be what other more experienced people qualify as a BRRRR... and it won't be what you qualify as a BRRRR. I think the perspective we both share is to buy a property at a good price, and *add* value to it in order to raise its value and then cash out with a refinance later on.

This can be a complete demo, it can be a partial demo, it might also just be finding a property that is run poorly by a bad landlord and taking it over to update rents to market value. 

BRRRR is a strategy, it doesn't matter what you do to the property. You can buy a turnkey property for 30% under market value, do nothing to it and refinance in 6 months to complete a BRRRR.

@Natalie Klesaris

If done correctly, the BRRRR Method can provide passive income and a revolving method for purchasing and owning rental property. The method works through the following steps:

Buy a property: The property you purchase should be a distressed property that needs some work to get up to code and ready to rent. Because of the home’s condition, it will likely be cheaper to purchase.
Rehab the property: Since the property is distressed, it may require extensive work. In this step, you’ll renovate the property to make structural, safety and aesthetic improvements, and prepare it for renters.
Rent out the property: Determine the rental price and find people to rent the home.
Do a cash-out refinance on the property: With a cash-out refinance, you convert your equity into cash. You access your equity by taking out a bigger mortgage, borrowing more money than you currently owe. The cash can be used for anything, including purchasing another property.
Use funds from refinance to buy another property: In this final step, you’ll start the process all over again. Using the funds from your cash-out refinance, you’ll purchase another distressed property and rehab it, before renting it out and refinancing that property.

Before deciding on the BRRRR strategy, make sure you weigh the pros and cons to ensure this is the right investment strategy for you.

Pros
A few pros of the BRRRR Method include your ability to make a passive income, increase your rental portfolio, and build equity during the rehab process.

Cons
Some cons to consider here are the cost and work required for rehabbing the home. Since you may not be able to get a traditional mortgage on the home, you may have to get a more expensive or riskier loan. Also, what happens if, when you go to refinance, you qualify for less money than you originally planned?

On top of that, this method requires patience. Along with waiting until renovations are complete, you may also be required to wait more time than you originally planned before you can get a cash-out refinance. It may take time to find good tenants to rent your home, too.

All the best!

@Natalie Klesaris I think the BRRRR strategy is starting to fade. Most of the older experienced investors just call it... investing.

The only way to maximize the strategy is adding massive value or buying UNDER MARKET and securing a solid appraisal to bring it back up. Actually you need both to make it work. In most markets, at these higher rates, it's hard to get every dime out of a deal. We're about to cash-out a property and we're waiting for the appraisal to come back this week. For our property to cash-flow we're aiming for a 65-60% LTV loan... depends on appraisal. Can't cash-out properties that low, expect to leave zero $$$ the deal, and repeat. Those days are gone. Keep that in mind when you make offers. Look for a good spread with properties that need work. In a lot of cases cosmetic updates and minor repairs may not be enough to bring that market value.

I'd avoid a complete demo unless you have a lot of rehab experience and a good contractor base. Opening up the walls and ceiling gets expensive. Drywall is expensive. It's not that difficult to rewire outlets (with grounds) from the basement and upgrade the panel. Plumbing is a case by case situation. Spend 75% of your rehab budget on kitchens and baths. Find properties with leaking roofs and replace it. These items command a high price but protect your investment. 

Also, buy a property, rehab it, and pray rates drop! Could be a surprise bonus but very doubtful. 

 This was the question I wanted to ask... they have experience. Nobody owns four properties and doesn't remodel something... haha

 How did you require your 4 properties if you didnt rehab them