All Forum Posts by: Patrick Rhodes

I have not run into this here in Tennessee. I use Tennessee Farm Bureau. I am able to write policies that cover purchase price plus rehab cost. Please keep us updated as you learn so that we all can learn from this experience.

1 Vote

Columbus, Ohio

Investment Info:

Other buy & hold investment in Tullahoma.

Purchase price: $50,000
Cash invested: $20,000
Sale price: $476,500

Bought the house and two lots for 50k. The existing home has a 30k owner finance note @3% for 15 years and cashflows $300/month. Current sale price of the home is $100,000. The land is currently being developed. UPDATE: I partnered with a builder on this project with a 60/40 split. Builder financed and managed the project. I sold the lots to the builder for 25k each. We sold House 1 for 238k and House 2 for 240K. My portion of the profit was about 16k for each house.

How did you find this deal and how did you negotiate it?

The deal came about because it was a package deal and the exit strategy was to build the two houses and sell them.

How did you add value to the deal?

I found the lots, negotiated front end and back end of the deal. I also sold the homes since my partner financed and managed the project.

Lessons learned? Challenges?

The biggest challenge was the builder going way beyond quoted time. We were supposed to finish the deal in September and close in October/November however we didn't close until February.

0 Votes

Investment Info:

Other buy & hold investment in Tullahoma.

Purchase price: $50,000
Cash invested: $20,000
Sale price: $476,500

Bought the house and two lots for $50,000. The lots will be developed and have 2 homes built. The game plan for the new homes is to sell them. The existing home has a $30,000 owner finance note @3% for 15 years and cashflows 300 per month. Current sale price of the home is $100,000. The land is currently being developed. UPDATE: I partnered with a builder on this project with a 60/40 split. Builder financed and managed the project. I sold the lots to the builder for 25k each. We sold House 1 for 237,500 and House 2 for 239, 900. My portion of the profit was about 16k for each house.

How did you find this deal and how did you negotiate it?

The deal came about because it was a package deal and the exit strategy was to build the two houses and sell them.

How did you add value to the deal?

I found the lots, negotiated front end and back end of the deal. I also sold the homes since my partner financed and managed the project.

Lessons learned? Challenges?

The biggest challenge was the builder going way beyond quoted time. We were supposed to finish the deal in September and close in October/November however we didn't close until February.

0 Votes

Quote from @Natalie Klesaris:

Hi all!

My boyfriend and I are fairly new to the real estate game (4 doors) and for our next investment we want to BRRRR. My question is - we do not want to get in over our heads, so what do you guys qualify as a BRRRR? Can it just be cosmetic upgrades throughout? Does it have to be a complete demo? I know the more work we would put in, the more return we would get, but we want to start slow, and honestly the cash we would get at the cash our refi is not our priority as much as the cash flow we would be getting after the refi (at least on this first one LOL!)

Thank you in advance!

The beauty of the BRRRR strategy and investing in general is that you can be creative. The numbers should drive the decision. I have done properties that needed mild cosmetic work and ones that needed complete remodel. Run your numbers, build your team, and be confident in both. Cashflow is hard but not impossible. Remember that there are 4 major ways to make money on buy and hold properties. ( Cashflow, Mortgage Paydown, Appreciation, and Tax benefit)

1 Vote

Manchester, New Hampshire

Quote from @Amy Raye Rogers:

The following is a few reasons why we've used lines of credit to scale our portfolio as opposed to using the BRRRR method. The BRRRR method is a great tool, but has certain drawbacks that are accentuated in the current market place. Let's weigh the pros & cons.

1) The line of credit allows you to capture the equity in your portfolio without having to conduct a risky refinance. Pitfalls of the refinance include an unpredictable appraisal process, reduced cash flow, reduced equity, and a risk for significantly higher interest rate. Do you really want to max leverage that 80k 1920's build with impending capital expenses?

2) The line of credit allows you to make "cash offers" that are more competitive then the down payment, conventional loan offers that are less appealing to sellers. You are more nimble and more attractive using this method. You can also save considerably on closing costs. The cash payment off the line can be spun off into a commercial or conventional line later at time most advantageous to you.

3) Your equity saved provides you more exit options for your existing portfolio. You're reduced leverage allows you to make a profit when you sell a property from your portfolio and you are less exposed in a falling market. BRRRR makes much more sense in a rising market with low interest rates than it would right now. A line of credit can be opened or closed at any time without impacting your existing assets.

4) You control your leverage by selecting which properties you want to cross-collateralize. This is the KEY POINT = control. As an investor you want to minimize your exposure to risk and maximize your ability to move quickly and competitively when a good deal emerges.

This strategy has allowed us to grow from 1 door to 20 in 2 years. We also have a massing net worth due to the protected equity using lines of credit. I highly encourage more investors consider this course of action!

Sounds like you are following the BRRRR strategy with a line of credit as your upfront financing which is common. How are you paying off your line of credit to buy the next door?

2 Votes

Quote from @Elliott Kleiman:

Hey everyone,

I'm curious on your thoughts. I have an existing healthily cash-flowing rental portfolio but my current strategy is to buy SFRs in solid "B" areas in a steadily growing region. Once I rent them and refinance (5 year terms, 20 year amortization) they cash flow but just barely. In 5 years when the new loan term begins, interest rates will likely be lower and rents will likely be higher, resulting in an increase in cash flow. This future cash flow (along with equity growth) is my interest in this plan. Assuming there won't be any banking issues in getting new loans, what are the potential risks with this plan? Cash flow is hard to come by these days so hopefully some of you have been thinking about similar questions!

I prefer to follow the guideline of "Long term holds should be on fixed long term notes". Of coarse when possible. The properties should cashflow more on fixed 30year notes if they are cash flowing on a 20year. If mortgage paydown is the goal, I would set them all up on fixed 30 year notes and then take all of your cashflow and pay down on one single home until it was completely paid off. The start on the next, " the snowball effect". This also gives you the ability to claim that cashflow as income for securing new loans going forward or pocket it if your income is compromised elsewhere for a short time.

Best of Luck and keep killing it

0 Votes

If I am understanding your situation from what you wrote, You would probably want to keep your current mortgage in place and take a Home Equity Line of Credit or a second mortgage on the remaining equity to invest with.

2 Votes

I agree with most of the replies here. You ordered the inspection and that job was performed. Zoning should be something that you look at pre offer, especially if the home was converted. Good luck in the future

1 Vote

Those are great books to start with. I would continue to read but start putting some of what you have learned into practice. If you find that you are not finding the ability to put it into action then switch from practical books into mind set books....

Think and Grow Rich

Rich Dad Poor Dad

Best of luck

2 Votes

San Jose, California

Quote from @Brandon Wallace:

Quote from @Patrick Rhodes:

Brandon,

It sounds like you have an amazing set up going for yourself. Because you need the cash to continue on investing and have the desire to get another property, I would look into a HELOC ( Home Equity Line Of Credit). This would allow you to keep your current mortgage with that killer rate and borrow against the remaining equity in the home. A typical HELOC would allow you to borrow 75-80%. You are only charged interest on the money while you are using it.

I would start by talking to a local bank.

Hope this helps.

Would using a heloc mess up the steps or process of the BRRRR method? What’s really the difference between heloc and cash out refi?

In general I use long term financing for a long term investment. A HELOC could be considered a short term loan which would act similar to a credit card using the equity of the property as your limit. In this case rather then refinancing out of the low interest rate that you currently have, you would have 2 loans on the property: your current mortgage and the line of credit.

The pros are:

only the amount borrowed at any given time would be charged interest

You would not have to refi the low current rate for todays higher rates on your existing mortgage

You can pay it off and use it again

The Cons are:

It is considered a shorter term loan so it will not be amortized over 20 or 30 years

It would be ideal if your next investment could pay it back off in a shorter period of time. Example a flip vs another BRRRR for your next project

0 Votes

Milwaukee, Wisconsin

All Forum Posts by: Patrick Rhodes

Patrick Rhodes has started 4 posts and replied 25 times.

Post: Columbus OH - Insurance barrier with potential BRRRR property

Post: Buy and hold partnership

Post: Buy and hold partnership

Post: What qualifies as a BRRRR?

Post: HELOC > BRRRR

Post: Buy & Hold SFR Right Now?

Post: How to take advantage of BRRRR strategies in this market of high interest?

Post: Misleading seller!! Who pays the Fees????

Post: What other Books / Resources should I review before my first REI?

Post: Cash out refi to a higher APR?