All Forum Posts by: Warren Bright

Hey BP World,

I've recently started my journey down the road of Real Estate Investing, currently educating myself on the basics and the local market. My Question is how long did it take before you felt comfortable to purchase your 1st property? My goal is to close my 1st deal in the first half of 2016.

Thanks in advance for your feedback

I think your missing the point with BRRR. Typically you buy an undervalued property that needs renovation then fix it up and refinance. An example of this is I bought a property for $25k, did $15k of renovations so I am in it for $40k. I rented it out for $600:month and it is appraised at $60k. I will refinance it to get my money back out of the deal (I could take more to use for more properties), but in the end I am cash flowing positive $ and have no money out of pocket.

Great, I see the gears turning. So part of BRRRR is the make sure you can actually execute the Refinance step. :) Before you jump in to a deal, make sure you find the mortgage company you want to work with on the cash out refi, get pre-approved, and get some type of confirmation from them that they'll cash you out at the end.

Yes, that's the key, you need to think about your long term strategy, so when working the BRRRR method, you need to make sure your property will cash flow when you have the long term 75% ARV mortgage at the end, which people sometimes don't plan for.

The main benefit to the BRRRR method is you are in for little to no cash, but you have to make sure it will cash flow at the end... meaning you need to make sure you have a really good deal going in.

I mean you could always take a nice weekend trip for $500 and still have $27,000 to invest in a new property ;-)

I agree with Brian, but I never count on market appreciation. Forced appreciation is great when you're able to make it happen. Cashflow is always a good strategy. 

It's only viable if the property cash flows enough to at least cover the new payment, or you are rolling those additional funds into another property where combined cash flows will cover this debt and any additional debt required. Unless of course it is an equity play and you are willing to cover any shortfall out of pocket because you are planning for significant appreciation, forced or otherwise.

Warren, so now you'd better find a place to invest that 27500 that will give you higher return then your mortgage interest, right?

You only took out 60000 for the original property, the extra 27500 is for some other property, right? So, don't let that money burn a hole in your pocket and don't spend it on a tropical vacation. Invest it wisely.