All Forum Posts by: Peter Martinson

 Is yours a potential luxury home on a multi acre estate or on an island? Or is it a regular house in a neighborhood?

A few years ago a Frank Lloyd Wright house that needed a bunch  of work in Chicago was listed for $175k. After a couple price drops it's sold for $135k.

Trust the agent, they're the professional.

That sounds a bit crazy to me, the $2 million when it needs repairs and updates. Do they have proof that Frank Lloyd Wright was the architect? That will certainly help the value, but not up over $1m difference from local experts who know the house.

@Peter Martinson I’ll play the devil’s advocate and suggest you only leverage as much as you’re comfortable with.

I also make sure that personally I leave some equity in my deals so that it’s a little easier to make more cash flow.

I try to keep at least 20% equity in my deals, that’s my comfort zone and I try to build up a decent amount of reserves in case something goes wrong and I need to cover the mortgage payment without rent for a few months.

But I have used the BRRRR method to refinance and pay for other investments and it does work.

Sure, but YOU aren't paying the mortgages, your tenants are. And the value is growing over time and rents are rising, etc. Before you know it, you'll have all kinds of equity and in many cases with BRRRR, you have $0 of your own in the deal. It's seriously the best.

I agree with Dominic. Most investors take out mortgages. With the BRRRR strategy, you are just getting the loan in a different way.

As a matter of fact, you are reducing the risk with BRRRR because in theory with the renovations your capital expenditures would be lower. For example I did a BRRRR and put in new AC units. Now it should be good for 15+ years. The debt is covered by the tenants, and I'm building wealth through appreciation, loan buy down, etc.

Based on what you are saying, you should be paying cash for any and all properties going forward. It's not a bad strategy, but you will move much slower.

I think your question is related to mortgage loans in general, rather than just BRRRR. You will almost always be taking on large amounts of debt when you invest in real estate, but that doesn't mean it's BAD debt. This debt allows you to own an appreciating asset and collect rent on it, with a relatively low interest rate. As you probably know, the goal is to have that rent offset your loan payments (cash flow).

Using your example: Fast forward 30 years when all of your debt is paid off and you own 100 homes that are straight cash flow. Will you be happy you used the BRRRR method?

@Peter Martinson, yeah, man, that's kind of the whole point haha. Whenever you hear an investor brag about their multi-million dollar valued portfolio, just realize that's not 100% equity. Most likely, they're highly leveraged. This is how the rich get even more rich. They take on debt/risk. 

Ideally, while it's extremely difficult with current market conditions, the goal of a BRRRR is to add enough value to the property so the investor can pull 100% of their capital out and use it for the next deal. Rinse & repeat for as long as you can. As noted, it's a lot easier said than done.