All Forum Posts by: Brian Larson

BRRR strategy. It allows you to create equity and multiply that seed money.

Quick/tired math as an example.  You leverage that $100k to buy a distressed house that after repairs is worth $133k. Let's say it was $75k to buy,  $20k to rehab and had $5k in holding costs.  So you are in $100k with a nice rental house that you then refi to get you cash back (note that 100/133 = 75%, that's for a reason :) 

Because you want to reuse that money,  let's assume you can do this 6 times in a year (1 new house every 2 months).  That may be aggressive but go with me. 

In one year you will have $200k in net worth added.  Aka,  you are 1/5 done in one year... :) 

You will also have cash flow from those properties so let's assume you CF at $100/door per month.  In year 1 you will have a few extra thousand to build that cash reserve (again,  I'm tired so no full math on this part.... Ha) 

OK,  so buying,  rehabbing,  refining and renting in 2 months might be tough... Let's say you only do 3 a year... That's still $100k in equity...you will have $1m in net worth in 10 years,  not 15. Not bad right? 

Add in the cash flow and the fact that the net worth number does Not include the $100k.... Well,  not bad

Good luck

I disagree that the 'good times are gone' RE is cyclical and there is money to be made at all stages. Sure, you may not find a deal that is 40-50% of its ARV in abundance like 2009 but at the same time, did you have a ton of cash at that time to pounce? few of us did.

But the good news is that the market is healthier and financing is easier to come by (HML are generally cheaper than back in 2009, conventional is way easier to work with these days) and many of us have a little extra money to invest.

You can still get deals and i highly recommend hooking up a solid pipeline of deals through wholesalers. How do they get the deals? lots of ways, but a good wholesaler with steady diet of deals is very valuable.

good luck

Good luck Jazz.  There isn't a better place for 'free'  help.  Set some goals,  find a niche and make it happen.

 For now :)  Banks tend to repeat past mistakes to allow end users to do the same

Totally agree with Joe. To expand upon this a little,  we are talking about arbitrage.  This is when you borrow cash at one rate and invest it in order to make a higher rate. The 'extra'  equity and loan amount will hurt your cash flow for that property but what if that' extra' was $10k that you were able to use your buy a note that returns 13% annually. If the borrowed cash was 5% that 13% return is really yielding you 8% on that equity. Arbitrage.

With that stated, this gets dangerous if the investments are riskier and you are over leveraged on the property. This happened in a bad way in 2007/2008 when banks were handing out super cheap HELOCs with LTV up your 110% (stupid..) then people bought properties that were risky (no cash flow and hoping for appreciation)or worse boats/atvs/etc, and then their houses went down.

If this extra MO ey is coming at 75% of LTV and you invest it wisely (notes, more RE, use instead of HML) then arbitrage can be gr

Sounds like you have a plan. Buying MFR while living in one part is a great way to go. Credit can be a problem BUT you have options since it will be your primary residence. Generally lenders are strict for investors with bad credit but they can be more lenient with you since its your home.

I would start by getting with a mortgage broker or local credit union (more flexible than typical bank like Chase) and figure out how much you can afford without a renter. the reason being that the bank is going to take this approach as you are a new investor. Once you know what you can afford then scope some areas and find places that meet your criteria. Once you track properties for a little while you will start to see trends and know a 'deal' when it shows up (its like seeing the glitch in the matrix... sorta happens.... ha) then buy it!

Only other thought would be to buy a place that needs work. Live in dumpy side while you fix one side, then fox other and rent it for more.

Good luck

 I do not disagree that there are a lot of 'rules' and you can be successful even if you dont play by them all. The example of the $1200/mo on 75k purchase and NOT moving because of 2% is bad. 

I think most agree (although few say it) that the rules are simply there as guidelines and not hard and fast rules so we are in agreement there. 

I guess my point is the combination of both paragraphs i wrote. 1. Phoenix is likely not the best market for a new investor that is looking at MLS/turnkey property to be CF+ 2. adding DP $ to make it CF+ doesnt make #1 better or the investment better. I agree with you that it is better to get a deal and i am fine if someone wants to put the standard 20-25% down to make a little CF. I just think that increasing the mortgage to 'make the numbers work' as asked isnt the right way.

Although this is an accurate statement i actually do not like to think of cashflow this way. Increasing the DP to make your property CF+ is not a sound strategy. You could technically do that in most places. 

I know i quote him a lot, but ask Mr. Leybovich what his strategy is and he will tell you that he needs to be CF+ day one in a scenario of putting 0% down. Is this difficult, yes. Can it be done...absolutely and I can prove it with the past few places i have bought. Thanks Ben for the harsh posts/blogs! :)

To Ali's point, Phoenix, AZ is no longer a viable option for purchasing and renting CF+ day one. Can it be done, yes, but you will have to get a better supply of properties that are off market, likely distressed/needing repair, etc. Definitely not a bad thing, just takes building out a solid pipe of deals that hit your target goals. 

Good luck, I hope you are able to find a good deal and

Here is the latest. In order to keep them straight I will number them. This is 'all time' not numbered by this years addition (i.e. #3 may actually be my first addition this year)

• Indy #3 - rented out on 2/7. Rented higher than initially planned. Happy with that. I am refinancing it now, should wrap early March
• Construction on Indy #4 starts Monday with plan for mid March completion. will refit after
• Indy #5 - I don't have final numbers yet but should soon. This rehab will take some time
• I did not get the place I last offered on. We could not agree on price. Very close but the margins were already tight (as my ARV was lower than hoped) so I bailed. No worries, great seller so we will hook up on the next one
• KC refi will start this week
• KC still slow. May look to new pipeline
• I definitely am looking for properties to add but sticking to the plan and the numbers
• Notes - meeting with my note broker this week. My fund has been a bust so fr. No notes available to purchase

My thought,  no you aren't missing any research or detail.  I see why you are in risk management :) 

It's now time to just do it.  Find a deal, analyze it,  figure out correct price for you and offer.  Nothing,  no book,  podcast,  blog,  etc teaches you more than the analysis and doing a real deal.  

Good lucm