BiggerPockets Podcast 327: The “Buy, Rehab, Rent, Refinance, Repeat” Method Made Simple With David Greene

by | BiggerPockets.com

It’s here—THE book on BRRRR! And who better to write it than the leading authority on this strategy: our co-host David Greene.

In this episode, he breaks down exactly how to “Buy, Rehab, Rent, Refinance, and Repeat” your way to wealth.

David reveals how BRRRR allows him to force equity, leverage the talents of others, and recycle his capital so he didn’t have to keep working 100-hour weeks as a police officer.

You’ll learn about the velocity of money, the “core four” players every BRRRR investor needs on his or her team, and the way to eliminate fear by taking a cold, hard look at the numbers.

David also explains how this strategy can reduce capital expenditures and how to come to the bargaining table with a cash offer that puts you in the driver’s seat.

He also addresses some common objections, including the notion that it’s difficult to influence the appraised value of your rehabbed property. Plus, you won’t want to miss the “Deal Deep Dive” where David goes into detail about one of his recent real-life BRRRR deals.

Whether you’re brand new to this method of investing or are looking to fine-tune your BRRRR skills, this episode will provide you with a ton of value. Still, we only cover part of what’s in David’s book, so check it out on the BiggerPockets Bookstore.

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Brandon: This is the BiggerPockets podcast show 327. It is time to BRRRR.

David: They say necessity is the mother of invention and that was my problem is I looked at my life, I am losing my life doing nothing but working to make this money to invest in real estate. How do I do it differently? BRRRR was my how? Rather than having to work crazy hours to make this money, I just made my money work for me instead.’

You are listening to a BiggerPockets Radio. Simplifying real estate for investors large and small. If you are here looking to learn about real estate investing without all the hype, you are in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online.

Brandon: What is going on everyone? This is Brandon Turner, host of the BiggerPockets podcast. Here with the man, the myth, the legend, Mr. David Greene. David Greene. Welcome to the show, man. Good to have you here. 

David: Thank you my friend. Thank you very much. There is nowhere I would rather be.

Brandon: Good, good. Well, today’s show, I should hope not because you are the guest star. Not only the guest host, or the co-host, you are the guests, co-host, interviewer, interviewee, I do not know. Is it interviewee or interviewer? I do not know. You are the guy I am interviewing today on the show. We are going to be talking about BRRRR. 

David: In this one hour, I have padded my resume to add like 12 different things like you have just said, very efficient. Much like the BRRRR method. 

Brandon: Very efficient. That is what we are talking about today is we are going to go through the berm method. Look, here is the deal. People, like we have been talking about it for a number of years here at BiggerPockets like for the last like five years, right? People love the strategy, love this strategy. I built my portfolio on it, David built his portfolio on it. But the problem is a lot of people still just do not get it. They do not understand all the rules behind it, how it works, the dangers, there are some things that are really important to be aware of.

We thought why do not we do a show that is just like here is everything you would ever want to know about BRRRR  investing in a podcast, here you go. That way in the future, when people are like, ‘Well, how do I BRRRR best?’ We are like listen to episode number 327 of the podcast. Oh, and also David wrote a book on BRRRR investing, which we will talk about today. There is that, but I do not know, David, you want to talk about anything else before we get into it? 

David: No, because anything that prevents us from talking about the bird method is just a waste of time. This is the future of real estate investing right here. 

Brandon: Well, I was going to tell you about my little girl, Rosie, but if that is just a waste of time, whatever, fine. If you want to hear about her. 

David: We can talk about Rosie but usually you just waste our time talking about your weird rashes or things that you are into that creep people out. Your odd taste in music videos.

Brandon: That is alright. I do not have odd taste. I do not watch music videos at all, do I? 

David: I would rather eat Randy?

Brandon: Okay, I would rather eat Randy. You are right. That is the best.

David: Find me a human being that does not say that is weird. 

Brandon: No, find me a human being that does not laugh hysterically when watching. Go to YouTube later and search for I would rather eat Randy and watch the music video ‘I would rather eat Randy, it is the best thing ever. 

Brandon: Alright, before we get into BRRRR investing, let us hear word from today’s show sponsor. Alright, guys. Spring has sprung, the sun is out and guess what? Most importantly, the end of April means tax season is finally over. Yay. You might even have a refund. Let us face it, tax season is the worst, especially for landlords as we tally up rent, expenses, depreciation and zombie out on spreadsheets and receipts. That is why I am glad I found Rentec Direct because the apocalyptic nightmare of property management is now finally easy.

Rentec Direct not only drastically simplifies taxes, it optimizes your entire process from vacancy listings to online payments to applications, to tenant screening. Managing Properties can be easy and your tenants will love the online tools you will provide them. Look, I know how much of a pain it can be when you got receipts piling up and a bunch of papers to rifle through.

It is so much better to have a digital solution like Rentec Direct. Trust me, this will simplify your business and take away a lot of stress. Here is what to do right now, do not wait until next year’s tax season rolls around. Go to RentechDirect.com/pockets to save 20% off your rent tech subscription. That is RentechDirect.com/pockets. Make 2019 the year you optimize your business using Rentec Direct. Go to RentecDirect.com/pockets to save 20% right now. 

Brandon: Alright, with that, let us get to today’s show on BRRRR investing. Like I said, we do not have a guest today. Our guest is also our co-host, Mr. David Greene. The author of the brand new book, Buy, Rehab, Rent Refinance, Repeat. The BRRRR Rental Property Investment Strategy made simple. If you are watching this on YouTube right now, you can see I am holding up the book. But David basically wrote the book, the book, the book on BRRRR investing know. It is amazing. You can get it at BiggerPockets.com/BRRRRbook. That is BRRRR with four Rs. We will talk later on but really I just want to jump right into BRRRR investing. David Greene, for those who do not know you, give us a 30 second overview of who you are, why you are teaching this BRRRR thing your story and your favorite color, go.

David: 30 seconds. I like black because I am a… 

Brandon: I do not really care why. 

David: Very good point. Thank you. Great to be there. I am a former police officer that worked a whole bunch of overtime to buy a whole bunch of rental property because I fell in love with real estate investing. 

Brandon: Do you really like black? Is that really your favorite color? 

David: It is by far my favorite color, everything is cooler in black. My ideal car would be black, all my clothes are black.

Brandon: I did not know that. It is okay. Alright, keep going. Police office, black, go.

David: I have worked a lot of hours. I realized that this was killing me and very hard on my life. I was working a hundred hours a week and sleeping in my car a couple of times a week to work as much as I could to save money to buy real estate. I discovered or rather heard other people talking about the BRRRR strategy. I sold one of my properties, I use the proceeds to buy a new property in a different and I refinanced 100% of my money at it. I actually refinanced about $15,000 or $20,000 more than all the money that I had put in and I had a very successful BRRRR and then I went on to start only using the BRRRR strategy. 

Instead of buying about two properties a year, which is what I could afford it and I was saving up money and putting a big down payment and then putting a lot of money into the rehab, I just recycled the same money over and over and over and I averaged about two properties a month. My portfolio scaled incredibly, I got really good at investing in real estate because I was doing it so often. I started to master all the individual parts of real estate and then I got to become the coast, the BiggerPockets podcast and best friends with the lovely Brandon Turner. 

Brandon: Wow, that is quite the story. By the way, that was over 30 seconds so we are going to have to edit that out. Dave, Dave is our editor, just kidding. Just kidding. No, but Dave is awesome by the way. Everyone said hi to Dave Messiah. What is up, Dave? Alright. I guess people cannot actually talk on a podcast.

David: Did you actually time me or are you just saying that was more than 30 seconds.

Brandon: I have no idea. 

David: You always do that.

Brandon: Alright. Let us go into BRRRR. David, first of all, can you explain, we are going to go broad overview, what is BRRRR investing and then we are going to actually spend the rest of today’s podcast going through each part of the BRRRR. Is that an acronym? Is that what we call? It is an acronym. 

David: That is exactly what it is. 

Brandon: Okay, good. I am not good at English. We are going to go through the rest of the BRRRR acronym one by one but let us first get an overview. When we say BRRRR investing, it is a weird sort of phrase, what does that even mean? Then we are going to go through the benefits of it. But first, what is it?

David: BRRRR is an acronym that stands for Buy, Rehab, Rent, Refinance and Repeat. It was coined by none other than the infamous Brandon Turner because he is very good at coming up with clever names for things. In fact, the book is dedicated to him because he let me write a book on a topic that he created. That is what it stands for and what it really is it is the order in which you go about investing in real estate, right? This is not some scam. It is not something like top secret algorithm that only really smart person can understand. You are just switching around how you go about the investing in real estate to maximize efficiency. 

Brandon: Can you give us a quick like kind of a quick story of a perfect BRRR. A hypothetical or a real one you have done.

David: Okay. You go or you buy a property with an ARV of a $120,000. Worth a $120,000 when you are done which is after repair value, right? Once you are able to… This property is in terrible shape. It is just tore up from the floor up, right? Like this is definitely a picture of a problem.

Brandon: Did you make that up? Tore from the floor up.

David: When things rhyme, people remember them.

Brandon:  I like that. That is kind of like core of four from your last book. 

David: That is exactly right. No one will ever argue with you if it rhymes. They just accepted as truth. I do not like people arguing with me. Alright, so you buy the house, it is going to be worth $120,000. You pay$ 60,000 for it because it is in such bad shape and you get a really good deal. You probably had to pay cash to be able to do that because oftentimes these houses are in such bad shape that you just could not buy it if you need it to get a loan. Then you spend about $30,000 to fix this house up, that is your rehab budget, right? For $30,000 and a lot of these markets where I am investing like the south and the Midwest where you find 1% properties, $30,000 actually goes really far. If you are listening to this in Seattle, you are like, ‘Oh, that would buy me a toilet.’ But in some of these areas, I mean, that is almost an entire remodel of a house including the roof, okay? Now you have got this house that has been completely fixed up, I would have to find something that rhymes like fixed up from the something that rhymes with fixed up and you spend a total of $90,000, right?

It could be your own cash, it can be money from your 401k, could be you and some friends have pooled your money together, however you do it. You go to a bank and you say, ‘Hey, I have this asset that is worth $120,000,’ and the bank orders and appraisal to make sure you are right and you are. Then they let you borrow a percentage of that asset which is what they would call the loan to value ratio. Most banks will let you borrow 75% of an asset’s value. In this case, 75% of $120,000 is $90,000, which coincidentally is the exact same amount of money that you put into this deal. You end up getting back 100% of the capital you invested and you are left with a cash flowing property that has been fixed up completely so you are not going to have any capital expenditures are maintenance fees for a very long time. You then have your $90,000 that you could buy your next house with, that would be the perfect BRRRR.

Brandon: Nice. Okay. We are going to dive into each part of that. I know people are saying, ‘Well, I do not have $90,000 cash,’ or, ‘I cannot do this,’ or ‘I cannot find a house for worth $50,000 grand in my area, or $60,000. I quit, I am going to go turn this off.’ Stick with us. Like this works, like BRRRR is cool because it works in downtown Detroit where you can buy a property for like six bucks and a pack of smokes. Or you can buy, I mean like I BRRRR apartment complexes, is not it?  Like this kind of concept like came from what apartment owners do all the time, big apartment investor.

This scales incredibly large. I mean you could buy $100 million property, put $50 million of work into it and then go and refinance it to get that $150 million back because that is worth $200M, right? Like do not freak out if you are like I do not have the money or I do not have the location, it works everywhere all the time, anywhere, if you work it right. I actually discovered like… I stumbled across BRRRR. You did your first kind of one of your first projects, I did as well. I tried to flip a house and it did not sell because the market crashed, it was like ’08. I was like, ‘Oh crap, what do I do?’ I cannot sell this property, right? My numbers are very similar. I bought it for like $50,000, I put $40,000 into it, so I had $90,000 into it.

It appraised for $130,000. Because I could not sell it because the market was just really, and I was like, well, I probably could have just kept dropping my price but instead I went to the bank and was like, ‘Hey, I got this property with a $130,000, can I get a loan for $90,000? They are like, ‘Okay, no problem. Here you go.’ They gave me a nice 30 year fixed mortgage on that property. I was like I used a hard money lender to buy it and I used a partner to fund the rehab so I did not even have any money in the first place. But then I get to pay my partner back and I got to pay the hard money lender back and so now I can go use their money again and I was like, ‘Oh, this was really awesome.’ I just started doing it from there. Then it was what, 10 years later that we coined it BRRRR.

David: Well, you also added $40,000 to your net worth in one fell swoop.

Brandon: Yes. 

David: Which we do not talk about all the time but that is pretty powerful. 

Brandon: It is, right? In fact I like… I do not talk about this a whole lot because I have done all my family and friends getting weird around me but like I hit the million dollar mark in equity when I was 30 years old. I want to do it by 30, I was at 30. It was like 30 and a half or something like that. But when I looked at why I did that, I mean it was entirely because of the BRRRR strategy. I mean like entirely because every single time I BRRRR, I would gain $20,000, $30,000, $40,000, $50,000 in equity. Then when I did it on my apartment, I gained $200,000 in equity. Like every single property I would BRRRR, I started gaining more equity. Then when the market started climbing up, that equity started increasing because now I got really nice properties and really nice areas. Boom, my net worth just went through the roof. Now, granted, yes sure the market might crash and it might drop me, that is fine. But BRRRRworks and I love it. Let us get into some of the benefits of BRRRR. Can you kind of lay out like some of the benefits to doing BRRRR investing versus others? 

David: Well, yes. The first benefit is that it increases your ROI, the return on investment ratio.

Brandon: It is too complicated, it is too complicated. I am going to try and… Where is my Joe Rogan podcast? 

David: Let us bring us bring Josh Dorkin in to understand my high level concepts. This is beyond Brandon’s capability.

Brandon: Yes, clearly. Alright, alright, keep going. Increase Your ROI, what do you mean? 

David: There is two ways that you can improve your ROI because there is two metrics that make it up. To calculate your ROI, you take all the money that an investment makes you in a year and you divide it by how much money you invested. You can increase your ROI either by increasing the amount of money you make in a year or decreasing the amount of money that you invest. Now, if you own rental property, you know it is very difficult to increase the amount of money you make in a year because that is largely done by increasing rents and you can only increase rents as much as the marker will allow. Meaning you do not have a lot of control over that.

What you do have a lot of control over is how much money you leave in a deal and that is where the BRRRR method is so important. Because in this deal that you just described, Brandon, if you had left $85,000 in that deal instead of or if you got back $85,000 instead of $90,000. Maybe you got to leave $5,000 of your own money in that deal. But that is such a small number that your ROI would have skyrocketed. What it does is it makes your money work very very very hard for you as opposed to you working very hard for your money to then invest in real estate, which is what I was doing as a cop. 

Brandon: Yes. Here is a good way I like to explain ROI to people sometimes if they get a little confused as like if I were to ask you David, hey, $500 bucks a month, is that a good return for a rental property? Like would you like $500 a month? Well, the question is, it depends how much you put into it.

David: Yes, right.

Brandon: Yes. Like if you invested $10M and all you were making was $500 bucks a month, that would suck, right? 

David: That was terrible.

Brandon: Right. But if you invested $1,000 and you are making $500 a month, is that a good investment? 

David: It is incredible. 

Brandon: All day, right? That is all day, that is an amazing investment, right? ROI is simply saying like are you making a good amount of profit based on how much you put into it? I mean people always want like a formula or a number. Do you have like, I mean, what is a reasonable return on a normal rental property? Like do you have any kind of numbers you can throw out at people?

David: Yes, I usually get a 12% return when I was just putting a down payment on a house and adding in the rehab. 

Brandon: Yes, me too. 12% is kind of my minimum. If I just go through down payment, I can get 12%, I am like, yes, that is pretty good. Now, I came up with 12% simply because it is about double the stock market. That is my like really anti-scientific way. I was like double the stock market, but I do not know if there is a better, I do not know if there is an a national average that people shoot for.

David: That sounds exactly like something you do actually as a side note because you get twice as good as every other man. Oh, well, I will probably get twice what those bozos could get and that is awesome. 

Brandon: It is more like if I am going to put in all the hard work, if I am going to get 6%, I might as well just give it to the stock market. Who Cares, right? I want to, for all the work I do in real estate, I want to get a better return. Now, what I found with BRRRR investing is sometimes I can get a 20%, 30%, 50%, hundred billion percent return, right? It depends on, because if I am putting in a dollar, totally, if I have $1 invested in a deal and at the end of the day, I make $10,000 a year in cashflow, that is a pretty good return right there. 

David: What if you had no money in the deal? You got it all out. Or what if you got more money than you put in? Like I do not even know what metric exactly to measure that. You are breaking wealth building scales with the BRRRR method when done well. 

Brandon: Alright. We will talk about how to get that and how to get all your money out but first, what does it mean? I think it is kind of related to I think what your second main benefit of BRRRR is. What is the second benefit? 

David: Number two is it increases the velocity of your money. Now, velocity of money is a term that economists use when they are mostly talking about the gross domestic product of the country, that GDP. What they are saying is like of the money in circulation, how many times is it changing hands? The higher that number is, the healthier it is for the economy because, obviously, every time money changes hands, tax are collected, right? The government wants money to change hands frequently, a high velocity of money because more taxes are collected which is a revenue from the government’s perspective.

Now, we are not the government. We want to take that same principle and apply it to our own wealth building philosophy and in our own life where if I can take a set amount of capital, invest it in a property, get it back and invest it again. The faster I can do that, the higher my velocity of money, the quicker I will build my wealth. Now, the example that you just gave where you bought a place for you are all in for $90,000, and it appraised that one $130,000 I believe it was.

Brandon: Yes.

David: You just made $40,000 to your net worth, right? That was with $90,000, right? That was almost 50% of the money that you put out. You then added that to your net worth and then got your money back which means you could then go do that again. If you could just do that twice a year, right? That is 100% return on the same $90,000. It is not even $90,000 you are leaving in a deal and not getting back. The faster you can send out that $90,000 and have it come back with a $40,000 bump to your net worth, the faster you can build wealth. We call that velocity of money and the BRRRR method lets you do that because you can recover all of or most of your capital when you do it right.

Brandon: Yes, I love that. People ask me a lot during webinars or during like meetups. It is like, ‘You know, Brandon, I only have $30,000.’ ‘I only have $20,000.’ ‘I only have $50,000’. Yes, I can go and buy one property with that maybe then I am stuck for another five or ten years saving up more money because their velocity of money is so slow at that point. That way, that is like what do I do about that? Oh, easy. Just go and BRRRR it, gets your $50,000, $30,000, $40,00 back and then go do it again and then do it again and do it again until you build up enough cash flow coming in that you now have… You can save up on bigger deals and you can start BRRRR apartments or wherever else. You can get out of. You can get out of a job, you can get financial freedom in less than 20 or 30 years. You can do it in three, five, ten years if you BRRRR, right? 

David: Yes.

Brandon: If you, yes.

David: That is actually what. They say necessity is the mother of invention and that was my problem is. I looked at my life and said, ‘I am losing my life doing nothing but working to make this money to invest in real estate. How do I do it differently?’ BRRRR was my how? Rather than having to work crazy hours to make this money, I just made my money work for me instead. 

Brandon: There you go. Alright, number three, what do you got? 

David: Number three. This is probably the basic, the foundation of the book, is that repetition builds mastery. You want to get good at what you do and you cannot get good at anything if you do not do it very often, right? I have snowboarded a total of probably seven times over a 12 year period, okay? I never got good at snowboarding. I am just good enough that I can justify going but it is not fun. I always end up sore and hurt. As I am doing it and my legs are burning and I am falling the whole time, I am like, ‘Why do I do this?’ Especially when that little five year old kid goes flying down the mountain next to you and it is just like humiliating, right? The problem is not snowboarding? The problem is not me, the problem is that I do not do it enough. There is not enough repetition. If I did it enough to get good at it, I would have fun. Real estate investing is not any different than anything else. Like one workout every year is not going to get you in shape.

Buying one house a year, you are never going to get good at real estate investing. You are just not getting the exposure, you are not getting the repetitions, you are not learning from what went wrong. You are not developing the contacts, they are going to send you deals first. You are not bringing enough business to a contractor to where he is going to give you better prices. You are not developing the relationship with the banks. I could go on and on and on, but the point is we all understand you get good at something by doing it over and over and over and you need the BRRRR method if you want to do that with real estate.

Brandon: I love that. I mean people do not talk enough about that, about the mastering, getting really good at something. Like I mean you and I both make good incomes. You and I both make good incomes from job stuff, like I mean business related stuff and from our real estate. Like what it really boil down to why we do well financially, it is because we are both… Like I do not want to say this to sound cocky but like we are both good at what we do. We both… Now, I am not saying we are the best, I am saying there is a million people smarter and better than we are but we are better because we chose mastery. How do we get, how do we every day try to improve? How do we ask what went wrong in that deal, how do we do better next time? How do we read another book, attend another class, whatever, like to get to get better?

I think a lot of people lack that in their life. They lack the desire to become a master anything, right? Like we just, in this today’s world, it is like how can I get the bare minimum to get the somewhat done and maybe I will be fine enough to scrape by, right? Like what is some fewest amount of hours I can work to get my paycheck to pay my bills? Anyway, that is one thing I like about you, David. It is you are very good at the mastery thing.

David: Thanks, man. That is why you call me the man. One thing I like about you is that you recognize the great things about me. I feel like this is one of one of your skills. I just want to call that out for everybody here so they know what you are good at. No, just kidding. When we interviewed Robert Greene, he actually talked about this same concept and Robert Greene is a super smart guy. I do not remember what show that was, I am sure we could throw it in the show notes, but mastery is really important. A lot of investors get very discouraged when things go wrong and those are things that always go wrong when you are new. The problem is they never move past the new stage, right? They are like me going snowboarding. Every time I go, it is like the first time. Or surfing, I have gone surfing with you twice, I think, right?

If I go once a year for the next 10 years, I am probably never going to get good at surfing and there is going to be five year olds that are beating me at it. I have a quote in the book that Bruce Lee says. He says, ‘I do not fear the man who knows 10,000 kicks. I fear the man who has practiced one kick 10,000 times.’ When I would teach defensive tactics to police officers, that was like my favorite quote. I loved it, right? Because the people who are best at something have the best technique because they practiced it so many times. BRRRR allows you to do that and if you are not BRRRR-ing, you better just be independently wealthy and have so much money. You can keep buying real estate because otherwise you are never going to get there.

Brandon: Ah, that is fantastic. Hey, I am working on a… It reminds me I am working on a sort of a book. We are relaunching the journal of the BiggerPockets’ 90 Days of Intention Journal pretty soon. I am kind of rebranding it, it is going to be awesome. But anyway, in there, I am adding a bunch of like written content and one of those, I actually have a section on how to become world class at something. Because this is what I do, I created an acronym for it. Do you want to hear my acronym on how to achieve mastery?

David: Really badly. 

Brandon: Alright. Okay. It is called FEEL, right? You have… To get an answer, you have to feel it. Here you go. Number one, you have to focus intently on what you want to be world class at, right? Like if you do not… Like you have to definitively say I want to be world class at this, I am going to focus on that F. Number two, you have to educate yourself on how top performers in your field became that way. Like educate yourself, what are the top burn investors doing? What are the top surfers doing? What are the top of racquetball player is doing? Whatever it is, right? Like educate yourself on what they are doing. Third, you have to execute on what you have learned. This is where a lot of people drop the ball.

They like see what a really world class person does, they do not execute on what they have just learned but like find out what other people are doing and then just execute on that. Then number four, L, learn. Learn from your attempts and repeat the cycle. Just FEEL, FEEL, FEEL, FEEL, FEEL all day long and if you do those over and over and over and over, you are going to become world class at whatever it is. But if you drop any of those four steps, you are going to miss out on becoming world class. That is what I love about BRRRR investing. BRRRR investing gives you the ability to focus on what you want to be world class at, to educate yourself, to execute on what you learn, and then to learn from the attempts and repeat it over and over and over through that velocity. 

David: There you go. That is why I love you, Brandon. You just taught me how to FEEL. 

Brandon: I just taught you how to FEEL. Alright, number four, what do you got? 

David: Number four is that the BRRRR method will decrease risk. Okay, now here is what I mean by that. When you buy a property that is like a fixer upper, you make it worth more and then you pull your money out it. Decreases your risk in several ways. One, you get all your money back out or at least most of your money. If you do not have any capital left in a deal, it does not matter if the market drops, you are not going to sell if it is cash flowing. You are just going to wait for the market to come back out. If you leave a bunch of money in a deal when the market drops, well, that money is theoretically gone. Two, by fixing a house a lot before you put a renter in it and refinance it, you improve its value but you also minimize the amount of work you are going to have to do later. If you buy a fixer upper property and just throw somebody in it, there is a lot of stuff that is going to go wrong all the time and that like you and I know, that eats up your cashflow faster than anything else, right? Then three, you are decreasing your risk using the BRRRR method because of the pure repetition factor.

I am going to get better at what I do so the next deal I am more likely to do even better than this deal and the deal after that, I am going to do even better than that. When you are operating from a place of ignorance or inexperienced, you are operating with a massive amount of risk simply because you do not know what you do not know.

Brandon: Very good. I love that. Hey, funny that you said, actually I was going to bring something up. You ever talk to somebody, like in a  meet up or whatever, and they say things like is not it risky to not have a lot of equity in a property or is not… Let me rephrase that, is not it risky to not put a huge down payment on a property? I get this argument that people make. Like, well, if you are going to do a no money down but I came out with a book on investing with no money down, I got this a lot, if you are going to do a no money down deal, that is way risky, that is way too risky. I would always argue, okay, let us just say you are going to buy $100,000 property, I am going to buy a property with $100,000. We are both buying properties with a $100,000. You paid a $100,000 for yours and put 20% down.

Now, you have got an $80,000 mortgage and you have $20,000 in equity, and you have got this property. I found that exact same $100,000 property. I put it under contract for $50,000 and then I put $30,000 of work into it. Now, I have got $80,000 in as well. We both have $80,000 into a deal, we both have $20,000 of equity, but I put no money. I mean, I BRRRR it so I have no money left in the deal. I have no risk at all of my own capital in that deal. You have got $20,000 in there. At the end of the day, who is riskier at that point, right? It is the person who put the down payment. Down payment has nothing to do with risk and nothing to do with risk, right? It is all about equity is where your risk is. Yes, if you buy a $100,000 property and you pay $110,000 for it, yes, that is risky. If you are losing cashflow every month, that is risky. That is not what BRRRR investing is about. We are investing in about gaining equity magically. 

David: Yes. Gaining equity without losing capital, you hit those two things anytime and you hit a wealth building like supercharger. 

Brandon: Yes, perfect, perfect. Alright, well that leads us to number five. What do you have for number five? 

David: Yes, it does. It allows you to scale to financial freedom faster. This is very simple math. An example you gave, I love your example, you take $90,000 and he added $40,000 to your net worth and then you sent that $90,000 out there to do that for you again. Theoretically, you could do that forever on the same $90,000. I have an example in the book of the guy who did it the traditional way and how long it took him to save up money and park it in an investment versus the guy that recycled the same capital, got better deals and did it that way. At the end of a 10 year period, it was wildly different how many houses one guy had versus the other. That is what this is about. We do not live to be 900 years old like people did a long time ago, that was reported in the Bible, right? Like lose to lose running around.

You cannot waste time. Once you get this thing down, you really need to put your foot on the gas and scale it up quicker. Real estate is incredibly powerful, but almost always, it is over a long period of time. This is not bitcoin, this is not buying a marijuana dispensary. This is not a get rich quick type of a thing, right? You are planting a seed that grows into a tree and that tree will be very powerful but it takes a while to grow which means we want to plant a lot of these seeds as fast as we can, get those seats back and then then replants them again. This helps you to scale much much faster because you need less capital to do so.

Brandon: There you go, perfect. Then number six, the last benefits we will talk about.

David: Yes, we have touched on this one briefly earlier but it lowers your capital expenditure, expenses, or your cap x. 

Brandon: What do you mean? 

David: Because you are fixing your house up, like what I will do is I will buy these trashed houses. I will put a new roof, a new HVAC, new flooring. I will fix the plumbing because the walls are going to be ripped out a lot of the time, new appliances, pretty much all the main things that break in a home or cause problems. I go in there and I fix before I get the appraisal. We will talk about this later in the show why that is the way to do it because it pumps up the value that gets me more of my money back. But as a little sweet bonus, some icing on the cake here, I then do not have to worry about an air conditioner breaking for the next 15, 20, 25 years where when I do not do this, I think I am doing great on our property three years when the HVAC goes out and my cashflow for the next year and a half is gone in one mistake.

Brandon: There it is. It is so true. All the properties that I have ever bought that I did not fix up fully before like renting them, like all of them, like they are unpredictable and I tend to have a lot more repairs. But I mean the properties that I have BRRRR-ed, which is majority of my portfolio at this point, like most of my BRRRR deals, they hardly ever break. They hardly ever go down because of, yes, they got the new… When you are rehabbing them, you are typically doing it like you are rehabbing it knowing that you are going to own this property for the next 20 years. Like what if it is a choice between, hey, I could put this cheap carpet or I can out this better laminate that is going to clean better or tile, you go with the better tenant proof, to use a term from Darren Sager, to tenant proof your property, you use the slightly better things. That also decreases your maintenance and repairs and CapEx over the next 10, 15, 20 years of the life of that property which is another awesome part of BRRRR investing. Very cool.

David: You do not have to worry about what some other company, like a turnkey company did, because you managed your own rehab. You know what was done, you know what went in there and you know like what was not done so you can prepare for it.

Brandon: There you go. Now, we are going to go through now… I am going to ask David a few questions on each of the BRRRR method. The Buy, the Rehab, the Rent, the Refinance, the Repeat that. We are going to move on to that next. But before we get there, I did want to quickly talk about in case you guys are interested in learning more about BRRRR directly in book format, this is like a long podcast. Again, David has got an amazing book. It is called Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple and it is literally like, how many pages is this thing? 340 pages…

David: 300 something, yes.

Brandon: Yes, it is a big book. Physical book, there is an audio than an Ebook. There is an ultimate package. You can look, get it. You can get more information about it or check it out at BiggerPockets.com/BRRRRbook. That is BRRRRbook with four R’s, BRRRR Book. You could also just go to a like Amazon, but I would recommend if you want the bonus content that comes with it, there is a bunch of cool bonus stuff like a BRRRR specific PowerPoint presentation David does on how to find private lenders to fund it. There is a 20 page Ebook on long distance BRRRR-ing. There is a live Q&A with David. He is going to doing a live Q&A and a bonus video on how to interview and hire great contractor. If you want those bonuses, you do have to buy it from BiggerPockets and not Amazon. But if you just want the book, Amazon has got it Barnes & Noble should have it as well. Anyway, go to BiggerPockets.com/BRRRRbook and check it out. Anyway, anything else you want to say in the book before we move on to the specifics of BRRRR?

David: Yes. The main thing that… The reason I think people should read the book and why I wrote it is that if you master the five, what I call the five elements of BRRRR, the Buy, the Rehab, the Rent, Refinance, Repeat, you are going to master real estate investing by mastering those. If you learn how to buy great deals, if you learn how to rehab houses well, if you learn how to calculate numbers and rent your house and you learn how to use financing and refinance and how banks work and then the repeat system, our segment is all about systems. How you make this automated so that it just goes on its own over and over and over. By default, you will have mastered real estate investing. You will be what I call a black belt investor, right? It is really simple. If you just focused on those five things. When you are done, boom, you understand real estate investing at a very very high level and can build wealth quickly.

Brandon: Sounds like a future book, Blackbelt Real Estate Investing by David Greene. Well, alright, check it out again. BiggerPockets.com/BRRRRbook. Yes, when you buy it, do me a favor guys, take a picture of yourself when you get the book. Take a picture of you holding the book and it tag David on Instagram, @DavidGreene24 and @BiggerPockets. Show it off and we will do a… We will accumulate some of those pictures together and we will kind of do some promo stuff with you and your stuff to try to build up social media presence at the same time. 

Daivd: Beautiful.

Brandon: Kind of fun there. Yes, alright, let us go back to BRRRR and walk through each segment there. Before we get there, let us hear a quick word from today’s show sponsor.

Hey David, you talked about this and your Long Distance Real Estate Investing book, but the Internet has totally changed the game when it comes to buying and selling houses, right? I know it is a big part of that book. Our sponsor today is actually a perfect example of this. FundRise is the future of real estate investing. Really like their software cuts out costly middlemen and old market inefficiencies to let you the individual investor share in long term appreciation and cashflow. FundRise unlocks access to high quality, high potential private deals from high rises and multifamily apartments.

Each deal is carefully vetted and actively managed by Fundrise’s team of real estate pros. This is the type of investing that used to be limited to giant institutions, but now you can jump in right from your laptop. You are probably thinking, how can I keep an eye on my property as well? FundRise has you covered. Their realtime reporting lets you know exactly how your projects are coming along. Give it a try. With this limited time offer, visit FundRise.com/BiggerPockets and get the first three months of fees waived. That is right, no fees. That is a great deal. Again, go to FundRise.com/BiggerPockets to get started now.

Brandon: Alright, let us get to it. BRRRR investing. Let us talk about buying a property. David, the first question that I get a lot when it comes to like BRRRR investing, or is the how do I buy it? I do not have any money that is why I want to BRRRR. I do not have much money. Is BRRRR investing, the buy part, only for people who have cash? 

David: It does not have to be. It does not matter where you get your cash from, you just need some cash to buy the house because the seller is going to want money. The easiest ways to have your own cash, but if you do not have your own cash you can borrow money from other people. That is why in the bonus content, I included a video and a PowerPoint presentation for how to give a presentation to people that you know about why they should partner with you on these BRRRR and they can provide the money and you provide the work and find the deal.

You can borrow from your 401K, you can borrow from a hard money lender, you can find private money like I mentioned earlier. You can use like traditional financing or non-traditional financing. The most important part of a successful BRRRR is that you are buying it under market value, you are rehabbing it to add value and you are pulling your money out after the house has been made worth more. If you hit those things, it will go fine. Now, the reason that buying is the most important part of the BRRRR process is that is the only part in the entire investing cycle where you actually make money. I mean there could be an argument to be made that you can make money during the rehab.

Like if you add an extra bedrooms or bathrooms or square footage that are worth more than you spent, you have created some equity there, but the most significant chunk is when you buy the house and that is why you need capital. This is really what it comes down to. Capital is so important because you need it to buy a property and buying a property is where you actually make money. Then everything you do after that is just turning it into like a usable asset that then you can rent out but you are really not making it worth more at that point.

Finding money is really important but the BRRRR strategy makes it easier to find money because the people who are investing can get their money back, right? Like that is a really big thing, I do not want to gloss over. If I go to someone and say, ‘Hey, let me borrow $50,000. I will pay you an 8% return on your money and in 55 years from now, you will have all your money back.’ That is not that enticing, right? If I am like, let me borrow your money, I am going to go use it to buy this house and I am going to pay you back in six months, all of your capital, and you are going to be making interest. That is a much easier proposition for you to the person.

Brandon: Yes, that is true. There is a lot of hard money lenders that will do it or there is a lot of… I mean like there is a lot of hard money lenders that very specifically understand the BRRRR strategy. That is what they work inside of, it is the BRRRR strategy. Now, granted hard money is going to be fairly expensive, but there is companies that will give you a hard money loan just for a year for a BRRRR. But the danger is that like you pay more for that money. Put it into your numbers when you run the numbers, make sure you are accounting for it and there you go.

Speaking of accounting for it, BiggerPockets actually has a BRRRR calculator that we built and you can plug in all the numbers including the purchase amount of closing costs, hard money costs, the refinance amount later on, you can play with all those numbers anyway. Check it out, BiggerPockets.com/calc. But one more question on the Buy, a lot of people question it and you kind of touched that earlier but I wanted to make sure we nail it here. What is the point of like buying it and then refinance it later? Why cannot I just go to a bank right now and just go borrow all the money needed for the property? Why cannot? Like what is the big deal?

David: Well, you can do that? Let us say that you are buying a property that is worth $100,000 and you are paying $100,000 and you are going to borrow $75,000 of that from the bank and you are going to spend your own $25,00. Then once you buy it, you are going to have to paint it, maybe fix a few things. You spend another $5,000 there. The problem is you just left $30,000 in this deal. Like you said earlier, for some people that takes four or five, six years to be able to make that money back and save it to buy the next deal, okay? The reason that we want to spend the money up front and then refinance it is we want the bank to give us a loan value or a loan to value of the after repair value once a place is fixed up. I do not want the bank to be letting me borrow on $100,000 house. I want to be buying it for much less than a $100,000 then make it worth $100,000 then go refinance it once it is worth $100,000 so that I am not leaving equity in the deal.

I am taking the same money. Like when Brandon and I calculate our net worth, it does not matter whether it is locked up in a property or it is in our bank account. It is the same amount, right? It says this very same for your own net worth. If you have $25,000 in the savings account or $25,000 equity in a property, it does not change anything. The difference is $25,000 in your savings account can be used to add equity to your net worth by buying more assets whereas $25,000 in equity is almost useless unless somehow you can access it from a Heloc. That is why you want to be refinancing and getting capital in the bank as opposed to living in the house because it cannot do anything for you when it is in the house.

Brandon: There you go. Also of course like most banks like you will find do not want to deal with nasty properties, right? Like, yes, if you go on to just a real nasty property and you go to a bank, like, yes, this thing is going to be worth $120,000 and I only need $50,000 for it. They would go there and they look at it and the appraisal comes back and says the roof is falling apart, there is foundation problems or whatever, the bank is going to say yes, no thank you. There are bank programs. I call them BRRRR loans, they do not call them that. But there are loans that banks can do specifically designed for the BRRR process because, again, this is not like we invented the BRRRR thing, we just put a name on it. But like they are hard to find, they are harder to find. But if you can find BRRRR bank… One of my buddies actually has a, what is it, a $300,000… I think he has got a $300,000 line of credit from a local community bank and he has an agreement with the bank.

Actually, like they built a loan for him to BRRRR. They gave them a $300,000 line of credit. He goes out and buys properties with that line of credit, fixes them up, rents them out, then goes back to the bank and they convert that line of credit money. Let us say he has a $100,000 of it immediately into a mortgage for him without having to go redo all paperwork and everything. This is all part of one big thing that he pitched them on and now he just BRRRR like that without any of his own money at all.

He just got equity after equity. He just keeps doing deals like this way and it is a portfolio lender so there are no limits. Now, if you go to like a bank of America, Wells Fargo, they are going to limit you at 10 residential mortgages on your name. Portfolio lenders like the small local community bank, they do not care. He just keeps doing it over and over and over and over. There are banks that can do it but those are a lot harder to find. Typically what I do, and I think David, I am not sure which one you do, but I think we look at private lenders. People I know will fund the deal, people I have met through BiggerPockets, networking conversations and I will buy it with a private money and then refinance it later.

David: I talked about in the book why like how to actually target properties like that because not only will banks not lend on really trashed houses, but it actually gives you a competitive advantage when you are looking to buy. Your competition does not have the cash and you do so they cannot buy that house. You have eliminated 90% of the buyers that are out there and you are only competing with the other cash buyers. Most of those cash buyers are home flippers, which is a bigger margin than you do as a BRRRR investor and you settle into that perfect little area where you can make a deal work that other people can.

Brandon: Yes. Actually, I was just thinking. Like one thing I love with BRRRR investing is that you can pay more than a flipper and a wholesaler but you are also like you are not competing with the homeowners. It is a sweet spot to be for investing because you can pay a little bit more. Now, a lot of people… What do you say about people who are like, well, shoot, ‘You are using these examples of like $100,000 property that you get under contract for $50,000. I cannot find that in my neighborhood, that is impossible.’ What he say to things like that? There are no deals like that in my neighborhood. There is no deals out there. I cannot buy the initial property.’ What do you say?

David: That is why we included that bonus content of long distance BRRRR-ing because I take the strategies that I used in my first book, Long Distance Real Estate Investing and I combined them with the BRRRR method in that bonus content. What happens is the BRRRR method allows you to invest extremely efficiently. The long distance method allows you to invest anywhere. When you combine those two things together, what you are really doing is removing any excuse you have of why you cannot do it. It opens up doors and that is how I was able to scale to as many rental properties as I have over a couple of years as I did. 

Brandon: Yes, I love that. I will also say this, anytime somebody tells me that they cannot BRRRR in their area, I always ask is there anybody flipping houses in your area? Because if somebody is flipping houses, you can BRRRR. Because, again, you can pay more than house over. If you tell me, ‘Yes, I cannot find any. There are no deals here to BRRRR,’ and then I can find a single house flipper who is doing it in your area, you are wrong. Like it is just as simple as that because like the real thing you should be saying is, ‘I am not good enough at finding deals like that house flipper is, right?’

If you figured out what that house flipper is doing to get deals, then you can do it, right? Because again, house flippers operate on what we call like the 70% rule. Oftentimes, not always, but like they generally follow something called the 70% rule which basically means they can pay 70% minus the rehab costs in order to… You make a profit on a flip. Well, you are doing basically the same exact thing with BRRRR investing, but you can typically spend less on the rehab and they are because you are not fixing up quite as nice as a flipper might be doing. Anyway…

David: Absolutely. 

Brandon: Excuse me.

David: The reason those margins work better for a BRRRR investor than a flipper is that you do not have your commissions and taxes and all the quick closing costs that go into a sale, you do not have capital gains on the money that you make, right? Like those are the two biggest pieces and you are taking advantage of low interest rates. BRRRR investors can make this work as opposed when home flippers cannot because of those two very big expenses that we are shaving off. Then we get all of the long term benefits of owning rental property as opposed to, ‘Oh, hey. You hit it out of the park. Great job on your flip.’ Your short term capital gains tax is 45%, half your profits are gone but all that risk is still there. 

Brandon: Yes, that is definitely why I like BRRRR more than flipping. I mean flipping is great for some short term money but BRRRR, I think, is far superior for longterm wealth. Alright, moving on from the Buy. The Buy you got there, now moving on to Rehab. Are there any tips you can give for like rehabbing? Like what are some of the things that you have done in your BRRRR investing that have added the biggest bank for your buck? Any kind of BRRRR tips or rehab tips on there? 

David: Absolutely. You want to understand the concept of highest and best use when you are going to rehab your property, okay? There is two ways the I find equity. One is I find it or I buy it. The house is worth a lot of money and I am paying less money. I just bought equity through the deal. The other thing is I make equity through the Rehab. That can be as simple as taking an outdated house and fixing it up. That will add value. If it compares to houses that are worth more, that are nicer, boom, you just made some equity. Another thing I will do is like knock down walls to make the function of the house actually more appealing and appraisers will give it value that way.

If you have got a kitchen that is closed off from the rest of the house and you can open it up, you just made some value for relatively cheap. The last thing I will do is I will actually change the floor plan of the house. I will take a two bedroom, one bathroom home and I will turn it into a three, two. Or I will take a three, one and I will turn it into a four, two. Or I will take a 900 square foot home surrounded by 1500 square foot home and I will add 500 square feet to it so now my 1400 square foot compared to the 1500 square feet home and the equity is much more than the money that I had to spend to do it, right? These are all prudent rehab strategies that I use and I talked about that in the book. Ways to look for Quick and Easy Win.

One of the things Brandon talks about all the time, and it is great advice, is when he is buying a house that is like 1100, 1200, 1300 square foot, if it only has two bedrooms, he knows there is another bedroom in there somewhere. Because a two bedroom house should be like 800 square feet. It should not it be 1100 square feet. Learning to look for things like that and adding that extra bedroom. One of the ways that I will do is I will look for a house that has a mud room, utility room, a sun room, something like that where the infrastructure is actually built out but that is not included in the square footage of the house, the appraiser will not give it value.

Then, I will go in and make that part of the house. I will run air conditioning to it, I will run electrical and plumbing. I will put up some actual dry wall and framing as opposed to just like the windows that they have out there and boom, I just added maybe 30%. Maybe that made my house 30% bigger for the costs of like $4,000 worth of construction work and I just created a lot of equity right there. That is probably the biggest stuff that I look for during a rehab that makes value. It makes it worthwhile to BRRRR invest. 

Brandon: Perfect, I love it, love it. What about staying on budget? I mean it is easy to get cost overruns especially when you are BRRRR-ing from a distance. But how do you typically stay on budget? 

David: I stay away from anything that has a potential to blow up to be a really big project, right? But things like plumbing and electrical. When I am looking at a deal and I see that like, oh, these pipes were corroded and we do not know how bad it is, I am probably going to move away from that deal because it is very difficult for me to know how much work this is actually going to take to fix and putting all new plumbing in a house does not necessarily increases the value, like if you put a new countertops, right? Other things like roofs, if I know I am going to replace the whole roof, there is only so many things that could go wrong with that. I know what it costs to put a new roof on. It is not like there is a bunch of surprises that can come up. Roofs hardly ever go over budget on any of the deals that I am doing.

I try to keep it as cosmetic as possible, that is a good strategy to have. If you can go in there and take out cabinets and replace counters and maybe putting an appliance or like flooring, there is only so many things that go wrong on a floor. You take out the old flooring, you put in new flooring. Those are some of the ways that I present going over budget. The times when something does go over budget are almost always related to electrical or plumbing. It is like the infrastructure that makes up the house. That can be very expensive because they have to pull things apart to figure out how stuff was run.

Brandon: Yes, great tips. One more tip I will throw out to you. For those people who are burying multifamily, if you are going to go into like a duplex, triplex, fourplex, 10, 20, whatever, when you are in the middle of the rehab and you are fixing things up anyway, it is a really good time to consider how do I separate the water meters? Electric, not usually electric is not separated, but water meters are oftentimes all just like master metered. But if you can separate that in the process of rehabbing it, then you can go and sub meter the water and now the tenants that are responsible for their own water. Even like a fourplex or eightplex or even a duplex, make the tenant responsible for their water and you will instantly see your cashflow just go through the roof, which on a multifamily means your value goes to the roof. Alright, number three. We went through the Buy, the Rehab, let us talk about renting. How do you know ahead of time what the property is going to rent for? Like after fix.

David: I have got, in the book I talked about a system of like you got your preliminary stuff and then you have got your specific stuff. The most specific ways to actually get a property manager to tell you this is what it would rent for based on what the other houses that they manage or renting for, right? But you do not want to keep going to a property manager every time you are analyzing a deal just to figure out what should I put it in the BiggerPockets calculator, right? For how much the rent would be? 

Brandon: Yes.

David: I use a website called rentometer.com which is free and easy and it gives me a very general idea of what the rents are usually over like a 20% plus or minus. It could be anywhere from $800 to $1200 and somewhere right around a thousand, right? Once I am left pretty interested in a property, I will take the next step and I will start looking up similar homes in the area that are similar to this one on Craigslist. I will see what they are renting for and then I will email a couple of the landlords and I will see how quickly they respond and how long the house has been on the market. I know if the landlord’s like, ‘Dude, I do not really have time to talk to you. I have got 17 people interested in this house.’ That is a very strong rental market and it is a place I want to own a rental property.

If he is like, ‘Oh my God. Thank you for e-mailing. It has been four months and nobody has said anything.’ That might not be a place where I want to be investing, right? That is kind of how I will verify what I just found on Rentometer and then once I am actually going to buy it, I want as many people’s opinions in on this deal as I can get. That is when I loop my property manager and then I say, ‘Hey, here is what I am thinking. This is what I am thinking I am going to get. Can you tell me if you agree? By the way, here is what the agent thinks it is going to be worth, here is what the contractor says I need to do. Can you look this over and let me know if you think that either of those people are being a little too ambitious and it will be worth a little less or we do not need to fix it up as much and I get another counselor in on the deal.

Brandon: Cool. I love that, great advice. What about property managers? Are you always recommending to use a property manager in a BRRRR deal? Is there a case where you might recommend somebody manages themselves?

David: There is people that can manage themselves if they really love managing and they are going to learn a lot from it. If you liked dealing with people, if you like managing your own property, if it is fun for you, then I say go for it, right? Not because it makes financial sense but just because it makes like emotional sense. But for most people, if you are a business, it makes more sense for you not to be there. If I owned a subway restaurant where we make sandwiches and I knew it was going to make $150,000 a year, I would rather pay a manager $70,000 a year and only make $80,000. Let them run it so that I have a completely passive business and I can go earn money in other ways, right? Some people want that full $150,000 and they are happy to work there all year long.

I think the trick is they start to tell themselves that they are making $150,000 a year when they are not. They are really making $70,000 a year. The investment is making them the other $80,000 because they make that $80,000 whether they work there or whether they did not, right? If you are somebody who has other opportunities, a job that you like and new job opportunities, like me, I have the ability to earn commissions as a real estate agent. That is a lot more money that I would make if I put that same time towards managing the properties I have. The other reason I love property managers is what I said earlier is I do not just use them to collect rent. I use them as like an advisor on my team. I am a very big proponent of having as many smart people in your world as you possibly can have. Giving you advice and learning to see the world from their perspective.

They are going to pick up on things that you miss, they are going to have seen things you have not seen. They are going to be looking at like, hey, when I am looking at this house and thinking this is great, they are looking at this house and thinking no way, that is way too small. We are going to have a new tenant every single year because there is not enough bedrooms or whatever the case may be or it is on the wrong side of the street. I get a lot more value out of my property manager than just collecting rent, which is why I like using them. But some people, they buy where they live and they know the area really really well and they enjoy the relationship they have with the tenant. I say, hey, knock yourself out if that is what you like to do.

Brandon: There you go, that is fantastic. Well, what about refinancing the property? One of the biggest concerns when it comes to the BRRRR investing, and this is rightfully so, the biggest danger is what if you buy the property for $50,000. You put in $30,000 to fix it up. You got $80,000 into it. You go to the bank and you are like, ‘Hey, this is $120,000. Can I get a nice loan for, call it $80,000 or $90,000. It is the perfect BRRRR. The bank says, ‘Sure, we can refinance that if it is worth $120,000. They send out the appraiser, the appraiser comes back and says, ‘Yes, property is worth $75,000. All of a sudden you are like, ‘Oh, shoot. I got $80,000 into it. The bank is only going to give me $50,000.’ I am going to be like all money left in the deal. That is a fear that people have going into BRRRR. Rightfully so, right? If they screw up that value, that is a problem. I am wondering, is that a fear? Should they be afraid of that or should they like how do you overcome that? How do you know what the property is worth it at the end? How do you deal with that risk?

David: That is your biggest like risk that you are taking when you use the BRRRR method. It is that appraisal, which you do not have any control over, can come in low, right? Now, it can also come into higher than you thought. That happens to me all the time and we never complain about that. But we always complain if it comes in less than what we thought. Here are some ways that you can minimize your risk when it comes to that. Number one, you can make sure that you are getting your comps from a credible source. Do not just get them from the real estate agent. Get them from the agent, have another agent look at them. Have your property manager look at them. Have another investor look at them. Let people tell you, no, this is not a good comp man. This is not a much better school district or yes, this house is the same size, but this is actually like a border… Like that is a different neighborhood. The street is what differentiates.

Even though it is only two blocks away, it is in a different neighborhood. There is things that either people do not know or do not want you to know and that is usually when you get the case of a low appraisal is your, is the agent provided comps that were different than what the appraiser looked at, right? Another thing that you can do if you are really really worried about this is you can order an appraisal and pay for it yourself. There is nothing that prohibits you from doing that. Now, if you are paying cash to the place, you do not have to get an appraisal, but at the same time it is not like you are not allowed to get one. You can pay for an appraisal if you want. Pay $300, $400, maybe $500, depending where you live. If that comes in at $85,000 before you buy the house or before you drop all this money into the rehab, you can say, ‘Whoa, whoa, whoa. We need to stop here,’ and get out of that deal, right?

I do not know why more people do not do that because this question does come up all the time as an excuse for why people do not buy. But there is no law that says you are not allowed to get an appraisal unless you are getting loan, right? Then the other thing you can do is you can actually challenge the appraisal if you think it was unfairly low and there is a lot of people, I believe you and I interviewed Andresa Guidelli, she said like two or three different times just to Philadelphia alone she challenged an appraisal and she won and they came back and awarded it much higher.

Now, here is a point I want to make. Even if all that stuff you try still does not work, why I love BRRRR, okay? Let us say that you spend $90,000 on this house and you think it is going to be worth $120,000 or $130,000 and it comes back $105,000. You get absolutely hammered. I mean, that is a pretty big difference, like it is a big chunk. Like your 20% off of what you thought it would be worth, right? I would call that a huge loss. In that case, you are going to get 75% of that $105,000 which is $78,750. Now, if we take our $90,000 and we subtract $78,750, that means we left $11,250 in that deal. This is on a huge loss and you have left $11,000 in a deal, okay? If that property where to cashflow $200 a month, which is not ridiculous, right? That is probably around like when I am averaging on the houses that do not cash flow, super great, that is $2,400 a year.

If we take that number, we divide it by the $11,250 we left in the deal, that comes out to an ROI of 21.3%, okay? The point I am looking to make here is even if the appraisal comes in super low, you screwed up you, everything went against you, your consolation prize on a bad deal is a 21% ROI year one. Yes, right? That is why I tell people like BRRRR vesting is like investing with training wheels. Like it is very hard to completely screw it up. Like you would have had to have an appraisal 50% below what it should have been before. You are like, ‘Oh, this is terrible, right?’ It is a much safer. You get a much higher ROI in a bad deal than if you had done the same thing if you would paid for a house and did the traditional method and have the same problem. Well, dude, you just left a lot of money in that house, this means your ROI goes very very low. 

Brandon: Yes, that is a good explanation of it. I would also say like if you are concerned about this, like BRRRR investing might not be perfect for you alone if you are flat broke and you are buried in credit card debt and you could not handle a problem like that. The same way flipping is not for you and probably rentals are not for you, right? If you are like completely broke. Like yes, things do go wrong. I did a BRRRR a couple of years ago where ARV is there. It was worth it but the bank at the end refused to give me 70% of what it was worth it. They just said, ‘Oh, we are only going to give you a what you have into it where you can document.’ Like, anyway, that would be like an annoying thing, right? It will end up leaving like $20,000 of my own money into the deal. That was fine.

I mean, I left $20,000 in there. I make $1000 a month on that property. I am making $12,000 a year on a $20,000 investment. That is okay for me, that is like what? 60% return on my money. Like it happens, right? But I still had a $20,000 to do it. Now, that said, if you are flat broke does not mean you cannot do it but you might need to find a partner who has a better financial foundation to be able to handle those kinds of things. Maybe you do the boots on the ground part and they are more of the risks. Again, it does not mean you cannot do things. It just means you have to start asking how.

David: Well, that would only happen to you one time because now you have learned, right? What that bank basically said is we will lend to you on a loan to cost ratio, not loan to value. That is what that is, right? 

Brandon: Yes. 

David: Loan to value is we will give you a percentage of the loan that is a percentage of what it is worth at the end. Like the appraised value. What is being said is we will let you borrow a percentage of the money you actually spent, which would be the cost, right? Which is a rip off to the investors. Now, the next time you want to do business with that bank…

Brandon: Correct. 

David: To a different bank, you would say, ‘Hey, can you do loan to value?’ What percentage can you do on this, right? Like you, knowing you Brandon, and I knew pretty well, you find a deal. You jumped into it, you say, ‘Hey, I will figure this out as I go,’ because that is what you do.

You are the guy that jumps out of the airplane and puts your parachute together on the way down.

Brandon: Pretty much.

David: In this case, like the parachute opened halfway and you hit the ground kind of hard but it did not kill you, right? Next time, you are like, well, now I am going to make my parachute before I jump out of the plane. It is a very subtle change. It does not ruin your entire investing career, but people hear that and they are like, oh, see that is why I cannot invest because what if the bank comes and tells me this? Well, you can solve that question by asking them upfront. In fact, what I tell people to do is get pre-approved by the bank before you even buy the house. 

Brandon: Yes.

David: You pre-approved on a hypothetical basis. Know your target numbers going into it and then try to beat those. Even if it goes bad, you are still very close to what you thought you were going to get so these surprises do not happen.

Brandon: Yes. There you go. Again, like so much of real estate success both from flipping, wholesaling and BRRRR investing comes down to just knowing how to determine that ARV. If you need more help with that, guess what? There is a website. It just got invented, it is called BiggerPockets.com and it is free. You can find out so much information about like figuring that out. Just go to the search bar and type in how to determine your ARV or listen to a podcast Webinar, blog posts, like forum conversation. There is so much information if you are willing to learn it. Again, mastering ARV is very important and BRRRR investing, to go back to what you said way earlier David, the repetition builds mastery. The more you do this, the better you are going to be at figuring out what that ARV, after repair value, is. Alright, moving on to number… The last of the BRRRR, the Buy, the Rehab, the Rent, Refinance. What about repeating the process yet? 

David: This is probably my favorite section of the book as well as the process in general, right?

Buying is where you are going to make your money. Rehabbing is where you are going to keep your money. Renting is how you are going to protect your money because you are getting a return on it, you are getting rent that covers your expenses. Refinance is how you are going to recapture your money and then repeating is how you are going to supercharge this entire thing, right? People ask me all the time like, ‘Hey, can I come be an intern and help you with your investing in?’ While I do appreciate that, the reality is my systems have become so tight with buying rental property that I do not even need an intern. When I buy a deal, it looks like I get a text from a deal finder, which is usually an agent and they say, ‘Hey, here is a house you should buy. 123 Main Street. The ARV is one $120,000. I think we can get it for $45,000. It needs $45,000 in rehab, what do you want to do, right?

I will hover my thumb over that text message, hit copy, and then open up a text thread to my property manager, another investor in the area and a lender. Then I will hit paste and I will send that address to those people. I do not even need to tell them what I want them to do because I have already given them a checklist of all the stuff that I want, right? When my property manager gets that text, he forwards it to the guy on his team that does the administrative work and that guy has my little checklist of stuff I want. He immediately pulls up the address, he sees is this in a good part of town where David wants to buy? Does that ARV look accurate? What would the rents be for a house in this neighborhood? Is this a neighborhood that our company, as a property magic company, even wants to manage in it, right? Are there any tax liens on this house?

Like I have them kind of do a lot of my due diligence for me and I will usually get back and a thumbs up emoji from them meaning, yes, this is a house that you should look further into. It is a good deal. Or a thumbs down with the reasons why, I do not think your ARV is that high. This is a bad neighborhood, those are bad comps. Whatever the case may be, right? The other people do the same thing. If I get three thumbs up, I would go back to the agent and say, write up the offer. They will write the offer, I will sign it on DocuSign on my phone which takes me all of four seconds.

I have gotten an offer in. When the agent comes back, it is usually, hey, they countered at this or you are accepted, right? That is very very fast because there is systems that are in place. But I am not cutting any corners. Just because I am going fast does not mean I am being reckless. I still have contingencies in this contract to back out of this deal if I do not like what I find. If it gets accepted, my agent knows. She immediately calls my contractor and says, ‘When can you go see the house? David wants you to walk it.’ She calls a home inspector and says the same thing to him. My home inspector shows up. It takes them about two hours to do an inspection, okay? An hour and a half into it, my contractor shows up to do his walk through. My contractor, just 30 minutes of the walk through. He gets a list of all the stuff he thinks we need to do. He then meets up with the home inspector who just finished and he says, ‘What did you see that I missed?’ The home inspector points out, ‘Well, we got a problem with the duct work up here. This outlet is not working.’ All this stuff that a contractor cannot see visually, right? 

Brandon: Sure.

David: The contractor then works in those significant items into a bid that he gives me, that is in an itemized fashion, right? He knows exactly how I want that bid to look because it takes me all of five minutes to look it over and have all the information that I need to make up my mind on. Is this a deal I want to move forward with? Now, if all the numbers line up with the $45,000 that my agent recommended, we are good to go. We are going to buy the house, right? If it turns out that they do not and the rehab is actually going to be $55,000, I look and I see is there anything we do not need on here that he just tacked on there because it would be nice but like a house in this area really does not need that nice of something, right?

If everything is essential and we cannot come down, maybe I can get the contractor to lower the price by $2,000 and I go back to the seller and say, ‘Hey, I can pay you $8,000 less than what I said. The repairs are more than I thought.’ If the seller says yes, we got a deal. If the seller says no, we do not have a deal and I move on. But I have invested less than an hour of my own time, probably significantly less than that in this transaction effect. The stuff that takes up almost all of my time is the phone calls with the people where we have to go through all these. Like subtle, ‘Oh, how are you? How is the kids? How is everything? How is your car doing? How is your dog? I saw your Instagram post, little Jason was so cute.’ Right? Like all that stuff is what takes up all your time. 

Brandon: Yes. 

David: That is what happens when you get a system in place. Is I can be doing that with 20 houses at a time and theoretically that is only taking up 10 to 20 hours of my actual time which is like a quarter to a half of a work week. Not that much time at all, right? When you get these systems down and you do the same thing all the time and the people that are in your sphere know what you expect and you know how they work and they know how to give you the information you want, your stress levels come down all the time. I mean I have people that come talk to me, they are like, ‘I am so stressed. I am analyzing this deal and everything is going wrong.’

They tell me what it is and I am like, ‘Dude, this is like such an easy problem for you to fix.’ That is just you doing this in a way that is really inefficient and stressing you out. Sometimes I wonder if they just like it. Like the drama makes them feel like they are doing something cool or they are a part of something important. Because the actual analyzation of rental property is probably one of the simplest things… Like there is no way you can analyze any other business as easily as we can analyze a rental. I could never look at that Subway sandwich restaurant and analyze all the data that goes into their income expenses and profit and loss and everything that is in there nearly as fast as I can with the rental nor could I have somebody else to do it for me for free, like I can in real estate investing, because all those people want to get paid.

Brandon: Make perfect sense. Alright, now we have got this repeating process going. We have got systems that are set up to help us out. Did we just scale up indefinitely? Do we shift into larger properties? I mean we kind of talked about that later but…

David: That is kind of where I am, right? Like, I am not buying a ton of properties right now because I do not want to have a portfolio of a bazillion single family homes, right? It is not a bad thing but it is definitely not an efficient thing, right? Like once you have got it, now there is a little bit of time that goes into managing it and when you have got one, two, seven, eight of them, it is not that bad. When you get into like 30, 40, or 50 houses, it starts to be a significant period of your time just cause you have got 30 or 40 houses where something is going to go wrong.

Like every month one or two or three of them is going to have something, right? What happens at that point is now I have to pay somebody to manage my portfolio. I have planted a lot of trees or seats. They have grown into trees, it has become an orchard. I have to hire like a ranch hand, it is probably not a ranch hand, whatever you call the person that manages an orchard, to go manage by orchard for me, right? Well, now that is taking a big cut on my cashflow. Whereas if you get it into multifamily investing at a certain point, which is a pretty easy transition for someone like me because I have got this really big portfolio of single family homes, I can like take the person who is managing it and write them into the expenses of the deal, right? Like they are not an outside expense eating into the profit. 

They were literally underwritten into it because they are an onsite property manager or something like that. Yes, you can scale infinitely but you probably would not, right? I look at single family BRRRR investing like the thing that connects the novice investor from the experienced like Grant Cardone of the world that are buying huge huge deals, these big syndicators, right? 

Brandon: Yes. 

David: You can try to start there and for certain people they can make that happen. Some guys can go from being in terrible shape to jumping into a crossfit gym and they could just catch up to everybody and do fine. The vast majority of people will not. They will pull a muscle, they will break something, they will strain something and they will never go back to work out again, right? It is better for them to start walking around the block and then jogging around the block and then lifted a little bit of weights and then doing some exercises in the pool and some swimming and some bike riding. As they get in better shape, they slowly start increasing the intensity and the complexity of what they are doing investing.

This is why I love BRRRR, right? It is not a complex system to try to learn. It is very simple. It forces you to master single family investing. You build these fundamentals that will be very, very beneficial to you when you step into like what I call like the big boy category where you have got these multimillion dollar assets that are moving around. But like you said Brandon, the BRRRR strategy came from multifamily investors that are doing this at a huge level. Some of these are deals that you and I invest in. We are using the BRRRR  strategy on really big deals. I have just applied that system to single family houses and made it really really efficient. You can scale and if you really love single family houses, then you probably should. At a certain point, you will not be able to get Fannie Mae & Freddie Mac Financing. Once you have got 10 finance properties, you will not be eligible. Well, then you look per portfolio lenders. Or if you are me, you will look for actual commercial lenders.

I will get similar, what your friend does, I have a line of credit with the bank of half a million. I will take my money or private money, I will buy the house and fix it up. Then I will borrow from that line of credit against the houses picks up and they will let you borrow 75% of the appraised value. The minute I have an appraisal in hand, there is no seasoning. Okay? I pay back myself where I pay back by private money investor and now I have this line of credit. Let us say the house appraised at $100,000 of $75,000 against the house. When I have used up the full $500, I will buy a couple more houses with cash then I will go to a commercial lender and say, ‘I have got eight cash flowing properties. I want to borrow this much money against them.’

They will make me get another round of appraisals on everything and then they will let me borrow 70% or 75% of what they appraised that. I have cleared off my line of credit, I have got all my money back and I can really start over again, right? That system is infinitely scalable. I can keep going and going and going if I want and just hiring more orchard hands or whatever you want to call them to manage those rentals, right? For some people, that is what they should do. For other people, once you have got a base, you are going to take all that equity that you just made in your portfolio which should be worth several millions of dollars and convert that into something like one multifamily property that is super easy to manage, that is very very easy, like scalable. Like you have got like one guy that can do everything as opposed to me where I am spread out over five or six different markets, right? What I would recommend is like that is what I am going to do. I am going to take this all, I am going to put it into one or two really big multifamily buildings. I am going to have all of my table wiped clean.

Like now, I have got two property managers that managed by entire portfolio because they are into two properties, right? Then I just start building it again the same way I did the first time but way faster, way more efficient, way More simple because now I have got all these systems, right? Once I have got another 30 to 35 houses worth a couple million in equity, I will converted into multifamily again, right? I will be having multifamily for cashflow, single family for equity, building the equity, moving in a cashflow. At a certain point I can refinance these multifamily properties, but that back into the single family things scale faster. I have got both sides that are kind of synergistically working with each other. It should be building my wealth for me as opposed to me having to do it like I did as a cop just by the sweat of my brow and the cut of my jaw. 

Brandon: Yes, that is genius actually. I never heard you explain it liked that before but I really liked that a lot. I want to go even a little bit more deeper into the BRRRR strategy here in the next segment of the show to make it just really like drive it home and that is not the Deal Deep Dive.

Hey, I want to take a quick break them today’s podcast episode to invite you to this week’s Webinar which is How To Evaluate An Offer on Rental Properties. Look, everyone knows rental properties can add to your net worth and provide consistent cashflow. But how do you ensure that property, that portfolio, is filled with solid properties that actually gets you closer to your goal? Well, that is what we are talking about it. On this free webinar, I am going to be walking you through the exact step by step process to evaluate part one of the webinars on evaluation, running the numbers, that even if you are brand new can use. Then how to offer. I am going to go through seven sneaky tricks that I use to get more of my offers accepted. Again, it is going to be awesome. Make sure you show up, but you got to register for it by going to BiggerPockets.com/eowebinar, that is EO, Like evaluate offer, eowebinar. I will see you there. 

Brandon: Alright, let us get to the deal deep dive. The part of the show where we dive deep into one particular deal that our guests has done. Today’s guest of course is David Greene. David, let us go to the deep dive. Number one, what kind of property is this? 

David: This is a property that actually my good friend Derek Clifford bought using the same strategies that I talked about in Long Distance Real Estate Investing and the BRRRR Method. I am using his because I do not want people to think that I am like cooking up my own numbers here, talking about my own deal. This was a duplex that he bought in Indiana. 

Brandon: Oh, okay. Where did you guys find it? I knew you guys kind of worked together. It is not just you, but you and Derek. 

David: Yes. He found this through a wholesaler in Indiana.

Brandon: Okay. How much was it? 

David: He paid $27,500.

Brandon: Okay. Negotiation, what went into that? 

David: He put it under contract, I believe, for about $34,000 and then after the inspections came back, there was some significant problems and because the seller was like pretty motivated to get this thing sold and really just needed the cash. He was able to negotiate the price down. There is something to be said for buying houses in this price range where the people who own these assets are usually not that financially savvy and just stayed that quick cash that they really need is more important to them then as much money as they could get. 

Brandon: Alright. What was the final price then? 

David: He ended up being all in after the rehab for $64,500 but the appraisal came in at $80,000. 

Brandon: Okay. What about funding? $80,000. What about funding? How is the initially funding?

David: He bought it private money and then he refinanced out of that private money with a bank loan. 

Brandon: Okay. Did you know what was it like? Like a Wells Fargo, like traditional, like Bank of America, Wells Fargo?

David: Yes, like one of the big banks exactly. 

Brandon: Okay. Then of course he BRRRR-ed it. That is what he did with it. Outcome of the thing? How much did you have invested in at the end then? He had a total of $64,500 into it. When he refinanced it, he got 75% of the $80,000 which means he got to pull out $60,000. He left $4,500 in this deal. Now, he was expecting his rehab to be a lot less. It was like around $30,000 he thought. He spent $7,500 or more on the rehab that he was anticipating because he was a little bit newer as an investor and he did not have a solid core for…

He kind of jumped in before he had all those pieces together. Even on a deal that he did not feel he did well on, he only left $4,500 in the deal. The house rented for almost $700 aside, it was $695 aside, for a total of $1,390 a month. Then after his financing, he cashflowed $450 total on this duplex where he left $4,500 in the deal. 

Brandon: That is great. 

David: Yes. 

Brandon: Wow. 

David: That is a deal that went bad, that is the thing I wanted to point out. 

Brandon: Yes. Okay, what lessons learned? I mean from what you know of Derek or anything you want to pull out as a lesson. You kind of mentioned it with…

David: Yes. He and I debriefed this one quite a bit, that is why I know it pretty well. I actually put that example in the book because I thought it was so good. The first lesson to learn here is that your contractor can make or break a deal. In my opinion in real estate investing single families, there is two things that go wrong consistently. If you avoid those two things, it is like your 80-20 rule, like you avoided 80% of your problems. 

Brandon: Sure. 

David: The ARV can come in lower than you thought and often does and your contractor can screw up your rehab budget or not finish on time or just completely disappeared off the face of the earth, right? Derek did the thing that almost everybody does and he paid the person as an honest and trustworthy contractor should get paid upfront and then the contractor did not finish the work on time, right? Then as they open things up, they saw that more and more stuff was wrong. At that point, you are kind of pot committed at that point like you have left or maybe as pokers a bad analogy here especially when I am talking to you and you there is no rhyme or reason to how you play poker. 

Brandon: I just win, that is what I do, David.

David: That is what you do. All I do is win. Tim Tebow of BiggerPockets over here.

Brandon: Hey, what is your strategy? I win, I win. 

David: I win dominantly. 

Brandon: Yes.

David: He did not have a great contractor, right? We are going to need to do the very same deal and in the very same deal in the very same market a second time, you would get a better contract, right? This is how repetition builds mastery. It is we are pointing out all the things that went wrong but it was the first freaking deal. Like you are supposed to have things go wrong, right? But if that is the only deal you do for the next two years, guess what is going to happen on the next deal, you are going to make all the same mistakes all over again. You go and you invest that money again. You get better contractors, you get better deal finders, you get better referrals. The whole thing starts to pick up steam.

Brandon: Perfect. Alright everybody, we are almost to the Fire Round but we are going to take a quick break here because I want to talk to you quickly about ironically water and how our sponsor, Flo, by Moen can help. Look, if you own any kind of property, water damage is actually twice as likely as theft and fire damage combined. This is why the Flo by Moen system is so great. It helps detect small leaks that end up causing big expensive problems. It is basically a whole home water monitoring and leak protection system in just one device. It also detects if the water has been left running or if a pipe is burst. True story, recently on my mobile home park, a pipe burst and I have not gotten the bill for it yet but it is going to cost hundreds of dollars in extra water, not to mention it could have caused a lot more damage to one of the homes there.

Look, the Flo by Moen System can protect against that. It can even shut off the water to protect your property. Some insurance companies are even giving discounts if you have a Flo by Moen installed. Get this, because you are a BiggerPockets of listener and you are awesome, you get 15% off of Flo by Moen. Go to meetflo.com/bp. That is meetFlo.com/BP and use code BP15. That is BP 15 for 15% off. Again, go to meetflo.com/bp and use code BP15.

It is time for the Fire Round.

Brandon: Alright, time for the world famous Fire Round. Of course, these questions come direct out of the BiggerPockets of forums, which you can visit at BiggerPockets.com/forum. Let us do this. Number one from Tyler, ‘Does anyone else see this major flaw in the mystical BRRRR strategy? At the end of the day, arguably the most important element is the refinance and the appraiser from the lender of your choices as a single event that tells you whether you successfully complete the BRRRR. These appraisers are not investors, they do not understand the concept of buying discounted properties. While I prepare a nice packet for them with my rehab, I acquired it, Blah, blah, blah. Still, how are you going to get that? He is basically saying you are hoping that they are going to agree with your ARV and you are just living on hopium. Is that true?

David: That is our favorite line right there. Yes, you definitely do not want to be relying on hopium. The first thing I would say to make sure that this does not happen to you is you have to understand the way appraisers think. Tyler here, while he is making a strong effort, is actually trying to convince an appraiser to think the way that he thinks, right? You are saying I prepared a nice packet with my rehab. I explained myself and how I got a discounted. I told them why I think what is worth what it is worth, but really you are better off to look at it from their perspective.

In fact, that is really the case in life, right? The appraiser is supposed to be as objective as possible and they do not really care what you think. You need to look at the comps in the area and say, what would an appraiser think, right? If your agents are giving you comps that are $150,000 but there is other comps that are $60,000 or $70,000 compared to your house, it does not matter what you do, they are going to use those and it is going to drag your value down. Sometimes you just got to pass up on a deal if you are going to be relying on an appraisal because the comps are just too all over the place, right?

Your ideal markets is like where see investors do this really really well at a high level are markets like Kansas City, Phoenix, Arizona, to a smaller degree like Las Vegas. Areas where there is a lot of track homes, right? It is just like the same thing all the time. All the houses around there have a very small margin for error as far as the appraise value. I see this as a real estate agent all the time. When someone comes to me and says, ‘David, I want to sell my house.’ If I pull comps and there is comps at $900,000 and there is comps at $500,000. That is tough. It is very tough to get a buyer to be comfortable paying $800,000 when their neighbor paid $500, right? I am like, man, everything is right here in between $600 and $650. That is a very easy way to value what that house is worth. Because I know that at working as an agent, I applied it to my investing world.

When an agent sends me comps that are $125,000 and I have a property manager or somebody else look at it and they are like, ‘Well, look at this house. This one sold for $60,000.’ Oh, that is a great down the street and it is pretty much the same thing, right? I would just avoid buying that deal. I do not want to give an appraiser any ammunition to find a way to give me a lower value and then spend my effort trying to change his mind. I would rather put the effort in up front looking at what he is going to be looking at and making my decision based on that.

Brandon: Perfect, perfect. Alright, next one. 

David: It is a BRRRR-fect. 

Brandon: BRRRR-fect, funny. Ryan said, ‘Hello, BP. I am looking for insight on the BRRRR method with regards to purchasing the property. If you do not have enough cash to purchase the property alright, can you use other alternatives like a Heloc or 401k or something like that? Then if you did that, would not that just hurts your debt to income ratio when you are trying to cash out refi?

David: Ryan, great question man. You are thinking the right way. I really liked this a lot. You can

use things like a Heloc or 401k or cash advantage. I do not know a lot about the 401k world to be honest with you, because I never had one. I worked as a cop, we have a pension and then all my money, I just put it in a savings account to buy real estate with. I know people do it, I do not know the rules and how that works. You got to talk to one of those experts to find out. My understanding though, I am not a lender yet, I am working on that, is that it will not hurt your debt to income because you are not actually taking on. I mean the heloc might be adding a little bit of debt, right? Like if you borrow $50,000 on a heloc and the bank says, ‘Well, if you borrow the full $50,000, you may have to pay $400 bucks a month or something.’ That could affect your debt to income, but it really should not be so much that it prevents you needing a loan unless you are already living on like a razor thin margin, right?

Brandon: I mean if you are going to refinance anyway and pay off that heloc, the lender will not count that anyway, right? Like unless you are going to hold on to that he locked after the refi. But like refi when they are calculator number is, this is the way I did it when I was a lender, like a banker. Like you would say, ‘Oh, they are paying off that credit card with the refinance. Okay, then we do not have to count that payment because it will not be there, right?’ Like when we pay it off, that will no longer…

David: That is a good question. Did you guys make them sign a statement saying that they would be repaying it off with the funds? 

Brandon: Yes, yes. We would actually pay it off. Now, granted they would go in and just drive that credit card right back…

David: Of course.

Brandon: Or take out that heloc but they do not… Like that is not the point. The point is like what do you actually have debt and you have paid it off. I do not know.

David: It should and it should not be a ton of money, right? It is not like you are going out and buying a Ferrari and now you have just set yourself up for $2,200 a month of debt. 

Brandon: Yes. If it is a heloc, you are looking at a couple of hundred dollars a month.

David: That is exactly… That is why I recommend at least using heloc prudently. 

Brandon: Yes.

David: It is like the cheapest loan you can ever get. A loan you give to yourself based on your own equity. It is interest only and it is usually at a really low rate. 

Brandon: Yes. Sure. 

David: The question was is it possible to BRRRR with a conventional loan? It is, but it is not efficient and that is why we do not like to do it. 

Brandon: Yes.

David: If you can get a conventional loan, the house is not in that bad of shape, the odds are you are not getting that good of a deal, be your paying closing costs, which are probably like your most expensive costs this entire thing twice. You are paying closing costs once when you buy it and then again when you refinance it which means you might have just taken $8,000 to $10,000 that you have to add value to that home just to break even from the closing cost. You can do it with a conventional loan. In my experience, people only do that because it is convenient, not because it is smart. 

Brandon: Alright, good answer. Next one. Brian from Saint George, Utah said, ‘I have been listening to the podcast, learned about the BRRRR method. It makes sense, I get it, but had a clarification question. When you refi, I am assuming that is a cash out refi, right? Are there greater restrictions on a cash out refi? Like could you maybe go to 80% LTV on a cash out refi for an investment property? Is it different or is that pretty much the same? Obviously, you are not a lender here, but based on your experience, David.

David: On my experience, yes, it would be a cash out refi and there are bigger restrictions. The biggest restriction is usually the loan to value will be a little bit less. Not a lot, but like you may not get a full 80%, you may get 75%, and your interest rate will be a little bit higher, right? But these questions are actually incredibly easy to answer if you do what we said earlier and you go to a bank ahead of time and you say, I want to get pre-approved for a loan, here is what they want to do. Because they immediately hear that and say, ‘Oh, this is a cash out refi. Here is your rate and here is your loan to value.’ You are not going to be hit by the surprise if you line your dominoes up before you actually step into the arena.

Brandon: Alright, I like it. Alright, well that was the end of the Fire Round. Before we get out of here today though, let us get to today’s Famous Four. These are the same four questions that we ask every guest every week. Let us throw them at you right now, David. Any current favorite real estate books? Anything you have been consuming lately? Real estate related wise. It is a long break, long pause here. Look at David, thinking up into the right. It is like he did not know this was coming. 

David: I know. I think that I have just answered this question so many times, I am trying to think of a new book. A lot of the stuff that I am reading right now is like real estate agents stuff when it comes to sales like that. Not quite as much investing. I still really think that like The Millionaire Real Estate Agent is one of the best books that has ever been written. Even if you are not an agent, just to understand like the concept of taking models and applying them to a business. 

Brandon: I still need to read that one. Number two, favorite business book?

David: So Good They Cannot Ignore You by Cal Newport. I love that stinking book. I recommend to everybody, read it. 

Brandon: Did you read his new one yet, Digital Minimalism? 

David: No, but I have heard you talk about it so much I might not have to read it. You are like my own personal, what is it, Blinkist? The company that… 

Brandon: Yes, I am your Blinkist, Brandon ‘Blinkist’ Turner. 

David: Beard Blinkist.

Brandon: Beard Blinkist. Number three, hobbies. 

David: I love sports. I love learning. I have a lot of fun like playing video games. I probably should not admit that as a grown up, a think I really like to do. Then like anything that pushes me and challenges me to do better, I am probably be interested in. 

Brandon: Alright, I like that. Last one. What do you believe sets apart successful BRRRR investors from those who give up fail or never get started? 

David: Yes, if you want to be good at BRRRR investing, it is really a matter of

educating yourself on what you are going to be doing. The more educated you are, the lower fear you have, right? Fear is what stops most people from moving forward. When you go out there and you take the emotion of fear and you turn it into a question, which is fear is almost always based on the uncertainty, I do not know what is going to happen, right? The more you get those questions answered and so you feel like you do know what is going to happen. Something as simple as getting a pre-approval from a bank before you go buy a house like that is just to remove so much anxiety right there. The more likely you are to be successful. I feel like the successful investors are the ones that take proactive steps to remove the negative emotions that they have as opposed to just waiting to get started for those things to go away on their own.

Brandon: Alright, alright. I like that, fantastic. Well, David, it is the end of the show. It has been a good one. 

David: I got to talk about BRRRR for the entire time. 

Brandon: Yes, it was like six hours of BRRRR investing talking. That is great. Let me ask you again, well, first of all, where can people find out more about you and then where can they get the book?

David: They can find out more about me on Instagram, I am DavidGreene24 or Facebook. Pretty much all social media, LinkedIn, everything. I am always DavidGreene24. Then if you want to get the book, I would recommend you go to BiggerPockets.com/BRRRRbook, that is BRRRR with four R’s. You get all the bonus content and you really get like… You can see the endorsements of the people who liked it. There is actually quite a few people on there that I respect a lot that really gave me a good review on the book. In my opinion, if you want to be a black belt real estate investor, you have to understand the BRRRR method. If you can get that down, you will understand everything that we talked about at a much deeper level.

Brandon: Perfect, perfect. Alright. Then lastly, David Greene, do you want to end the show? You want to take us out even though you are the guest today, but I will let you take it out if you want. 

David: I knew you were going to do this to me because you just do not like being on the hot seat of having to come up with a clever nickname. 

Brandon: I know. I will call you David Blinkist Greene, but…

David: But I already called you that, right? That is kind of…

Brandon: I know, I am not clever.

David: … at this point. Alright, this is David Greene for Brandon ‘Not Clever’ Turner, signing off.

Brandon: Not Clever. 

You are listening to a BiggerPockets Radio. Simplifying real estate for investors large and small. If you are here looking to learn about real estate investing without all the hype, you are in the right place. Be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online.

Watch the Podcast Here

Help Us Out!

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here. Thanks! We really appreciate it!

This Show Sponsored By

Rentec Direct is the highest rated and easiest to learn property management software that includes free US-based support.

Are you ready to combine powerful property management software with the best customer service in the industry?  Their friendly US-based support team will help you and your staff faster than you’ve ever experienced!

Visit rentecdirect.com/pockets to receive a 20% discount!

Deep Dive Sponsor

FundriseFundrise enables you to invest in high-quality, high-potential private market real estate projects. I’m talking anything from high rises in D.C. to multi-families in L.A. — institutional-quality stuff. And each project is carefully vetted and actively managed by Fundrise’s team of real estate pros.

Their high-tech, low-cost online platform lets you track the progress of every single project, and keep more of the money you make. Oh, and by the way, you don’t have to be accredited.

Visit Fundrise.com/biggerpockets to have your first 3 months of fees waived.

Fire Round Sponsor

The best way to avoid water damage is to prevent it. Backed by years of product development and industry leading technology, the device detects and stops leaks. From your toilet, shower or faucet, to the pipes in your foundation and behind your walls, the device monitors all of them so there’s no surprises on your water bill or catastrophes when you come home from vacation.

Go to meetflo.com/bp and use code: bp15 for your 15% off!

In This Episode We Cover:

  • Who David is
  • Defining and explaining BRRRR
  • Discovering the main benefits to BRRRR
  • How to increase your ROI
  • Understanding what increasing the velocity of your money is
  • Getting good at what you do
  • How to decrease risk by building equity and pulling capital
  • How to scale to financial freedom faster
  • Ways to lower CapEx expenses
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Make money work for me.” (Tweet This!)
  • “Repetition builds mastery.” (Tweet This!)
  • “Operating from ignorance or inexperience is operating with a massive amount of risk.” (Tweet This!)
  • “Down payment has nothing to do with risk.” (Tweet This!)
  • “BRRRR investing is about gaining equity without losing capital.” (Tweet This!)

Connect with David

Bonus Episode!!!


In this special half-episode, David reads from Chapter 2 of the brand-new book he’s written on the BRRRR strategy. This particular passage goes to the heart of what makes BRRRR work: buying great deals. So how do you pull that off? In this chapter, David reveals: what he looks for when targeting properties, how to practice analyzing deals so you won’t be afraid to pull the trigger, and how to find team members and align their incentives with yours.

Order “Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple” today at www.BiggerPockets.com/BRRRRbook. Physical copy, eBook, or audio version (read by a professional narrator) are all available. Or you can also get EVERY format if you order the Ultimate Package. That includes the exclusive eBook, “Long-Distance BRRR,” a bonus video on how to interview and hire a great contractor, and access to a live Q&A webinar with David.

In the meantime, enjoy this bonus episode!

Read the Transcript Here

This is a BiggerPockets podcast show 327 and a half.

You’re listening to BiggerPockets Radio. Simplifying real estate for investors large and small. If you are here looking to learn about real estate investing without all the hype you’re in the right place. Stay tuned and be sure to the join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online.

Brandon: What is going on everyone? My name is Brandon, host of the BiggerPockets podcast and you’re about to hear a different type of show. Actually, a show with my cohost, Mr. David Greene. Because yesterday here on the BiggerPockets podcast we talked for like a good hour about the BRRRR strategy, which stands for buy, rehab, rent, refinance, repeat. One of my favorite if not my favorite strategy in all of real estate, how I built my entire portfolio.

You heard about it yesterday. If you didn’t listen to that go listen to that show. It was incredible. David Greene just tells us everything you would ever want to know about BRRRR investing because we launched yesterday the BRRRR Book.

It’s called, the official title Buy, Rehab, Rent, Rent, Refinance, Repeat. The BRRRR rental property investment strategy made simple and so today this half episode we’ll call it a half episode. We got kind of a special treat. It’s actually just David is reading an excerpt, excerpt from the book. I never know how to say that right here and we’re going to listen to that so by the way if you get the audiobook, if you end up actually getting the audiobook from Audible or whatever just don’t be throwing off.

There is a professional narrator actually recording that one, but today we actually got David the man to record this episode so anyway. Speaking of which if you liked today’s or yesterday’s show or today’s snippet of the book you can actually pick up the BRRRR Book by just going to BiggerPockets.com/BRRRRBook. That’s BRRRR with four Rs. BRRRR Book, the ultimate package comes with every format of the book and a ton of bonus content.

I’d highly recommend that so you get the audio, digital, physical, and a back rub from David. It’s amazing so you get it exclusive also like a 20 page not really a backrub. You get exclusive 20 page e-Book from David on long distance BRRRR-ing. You get a BRRRR PowerPoint and presentation that you can use to show private lenders the deal and access to a live Q&A webinar with David.

Check it out. The ultimate package is like $49 bucks. Totally worth it. Without further ado though let’s get to today show, which is just David Greene the man reading part of chapter 2 of the new book about how to buy properties under market value. Hope you all enjoy it.

David: Finding property deals and analyzing them. As I mentioned before the most important step in the entire investment cycle is finding a great deal. There is no substitute for it and if you learn how to do just this one thing well you’d probably do great with investing. Finding great deals is party number one if you want to BRRRR successfully.

Before you can find a great deal you need to be able to recognize one. Every investor needs to know what they’re looking for and only then can you know where to find it. I highly recommend writing down your criteria and sharing them with other investors. I know my own criteria very well and share them with everyone I know.

My criteria are simple and logical. I look for three things in a deal. Number one, to be all in for 75% of the ARV. Number two, to cash flow positively. Number three, to be in an area that won’t cause me a headache. Now, these criteria might seem oversimplified, but take a deeper look and you’ll see why they work so well for me.

If you want to be all in at 75% of ARV there needs to be a significant amount of equity in a deal before I’ll even look at it. This weeds out marginal deals and prevents me from talking myself into a mediocre deal just so I can say I bought something. It protects me from making bad decisions and ensures I have a built in safety net in case something goes wrong with the rehab or the ARV. If I need my property to cash flow properly I won’t be spending much time looking at anything that isn’t in a 1% rule area.

This saves me time and energy. Number three, if I’m avoiding headache areas I’ll also be avoiding a lot of long-term bad investments. Investing is more fun when you’re not constantly frustrated with evictions, destroyed properties, and late rents. I also end up buying in areas that appreciate faster than the surrounding neighborhoods so I can refinance several times over the period of time I own the property and reinvest the money I pull out. Because I know what I’m looking for, I also end up knowing where to find ideal properties.

I spend very little time analyzing the vast majority of properties that other investors waste their time looking into. The more I know what my target looks like, the quicker I realize it when I see it. You should do the same. Knowing what you’re looking for in a deal comes first, but you still have to be able to analyze a deal in order to know if it makes sense to buy.

In my experience, the number one factor that prevents investors from building wealth is the fear of what could go wrong. The more fear someone has, the less likely they are to take the steps required to move forward. We can’t learn if we aren’t moving forward. If you want to overcome fear, get good at analyzing deals. As Brandon Turner, the best-selling author of the book on rental property investing and the BiggerPockets podcast cohost says, “Overcome fear with math. Math won’t lie to you. It’s not subjective. Math won’t confuse you or leave you feeling disillusioned.”

What Brandon is really saying is this, if you’re feeling afraid of the deal, get better at understanding what the deal is with concrete numbers and the fear will disappear. Understand how to analyze a deal will take so much of the fear and uncertainty out of the decision. When I talk to would be investors about what holds them back almost every one of them tells me the same thing. A laundry list of fears or concerns they have about what could go wrong.

When I asked these same people what they have done, learned, or studied about how to handle those problems they almost never have an answer. The solution is simple. Learn to analyze properties and you’ll find yourself feeling much better about the decision to be made regarding whether or not you should buy. The best way to get good at analyzing deals is through practice. Repetition and practice build mastery. When you first start to analyze properties there are two things you should focus on.

Not coincidentally they are the same top two things I consider in my own criteria. The first is how much you’re buying a property for under its value, how good the deal is. The second, is if the property will cash flow positively or not. To know how far below value you are buying a property for you need to understand a few things. The first is comps.

Learn how to find comps and compare them to the property you’re evaluating. Other people like agents, appraisers, and wholesalers can help you with this. You can also do some of this research yourself using listing portals like Zillow.com or Realtor.com. The next thing to understand is rehab costs.

Learning how to estimate rehab costs is really beneficial. Talking to contractors, handymen, and other investors is a great way to build up your confidence in this area and know if you’re overpaying. You want to see the projects from their eyes. If you’re using the BRRRR method, you’re very likely to be doing significant rehabs. Learning how to estimate rehab costs is a skill that will come in handy.

The last thing to learn is being able to determine whether or not a property will cash flow. My favorite method is what I call the napkin method. You’re basically taking the five different inputs involved in just about every purchase and quickly calculating them by writing them down on a piece of paper or a napkin. The five inputs in deals are number one, rent.

Number two, mortgage payment. Number three, property tax. Number four, insurance and number five, property management fees. We’ll talk more later in the book about how to calculate these numbers more accurately.

For now, I would recommend creating a baseline in your mind for an average amount of each one. When you look at enough homes in a specific area, you start to get a basic idea of what they cost to own. This basic idea becomes the baseline you will use to help recognize a deal that stands out. For instance, if you’re looking at houses between a $100,000 and $120,000 in an area and you look at enough of them you’ll start to recognize patterns in the numbers behind them.

Rents may average $1,000 to $1,200 a month. Mortgage amounts maybe around $450 to $550. Taxes maybe about $100 to $125. Insurance costs may run about $40 to $50 and property management fees at 8% would be about $80 to $96. If you use all conservative numbers in these estimates you could come up with a baseline to add up either in your head, on a calculator, or on a piece of paper, or a napkin of course.

If you continually do this often enough you’ll start to find patterns in the way the numbers read. Once you recognize these patterns, a good deal will stand out immediately. That is what you’re looking for. The only way you get to this point is by repeatedly analyzing deals over and over and over.

Those who can make the fastest decisions are those who have the most experience. Just like new quarterbacks struggle in the NFL because they don’t have much experience as reading defenses yet new investors will struggle because they haven’t analyzed enough deals. Commit yourself to analyzing several properties a day, five days a week. Do it until you feel you know the result before you even run the numbers.

Once you get to that point, you’ll find your confidence skyrockets and your fear of the unknown decreases significantly. We want to commit to mastering real estate. You can’t claim to be a master of something until you can anticipate what is likely to happen before it does. In this specific circumstance, you want to be able to anticipate which deals will pencil out and which won’t before you make the time to analyze them thoroughly.

Still don’t believe you’ll ever be able to do this well? Compare it to other everyday chores you do without even thinking about it. As you walk through the grocery store, you recognize a good deal when one of your staple food purchases is on sale. The reason is simple, when you’re used to looking at something over and over your mind remembers what falls within the pattern of normalcy for that item.

When a sale occurs that is outside the normal pricing it immediately catches your attention. Real estate isn’t any different. Maybe you just haven’t been looking at it as much because it feels more intimidating. Rockstars know rockstars. Finding talent to help you find deals. Once you know what you’re looking for and how to recognize if it’s what you want the next step is to find people that help you do it.

A personal loan can only do so much, but by leveraging others whose goals align with yours you’ll find that your success will start to come much much faster. Rockstars help you accomplish as much as you can in a short amount of time as possible. Compared to painstakingly going at it alone. Rockstar is a synonym in the world a real estate for someone who is really really skilled at their job. There are many musicians in the world, but there are very few rockstars.

If other people can help you succeed fast, a rockstar can help you succeed at ludicrous speed. They are the cream of the crop, masters over their profession, and are equipped with life-changing talent and often have already endured years in the crucible of real estate investing. Having just one rockstar in your corner can make you immensely successful. One of the core principles of your business practice will be to find, attract, and work with as many rockstars as possible.

When I look to buy in a new area my first priority is to find my core four. The core four are the four people I need to invest in any market any time. These are the people who will be running my business for me, making me money, and helping me become successful all while returning the favor. They are my dream team.

Even if you’re looking to invest where you live, you’ll still need a core four. The following examples of what it looks like to have a rockstar at each position. Number one, the agent. Rockstar agents have the best referrals because they only work with top lenders, contractors, handymen, and property managers. These agents are never hurting for business.

Don’t lower their commission and know real estate like the back of their hand. Rockstar agents got to where they are because they know how to close deals. They found the right people who can fix problems when they arise and they have very low tolerance for people who don’t. Rockstar agents are usually very resourceful, knowledgeable, and creative. These are all the traits you want working for you when it comes to building your wealth.

Finding a rockstar agent should be your first priority because they can help you find the rest of your core four. You’ll recognize a rockstar agent because they aren’t bending over backwards to win you over. They are professional, courteous, and helpful, but they have a confidence in their process that won’t take a second place to a newer investor. Rockstar agents want to educate you on the process, but also get right to the point.

If you want to work with an adept agent you’ll need to be comfortable following the process they have in place. It’s there because after hundreds of deals they’ve learned the best ways to secure them. Number two, your lender. A rockstar lender is the one who doesn’t throw in the towel easily. They have access to the most loan programs and when a loan doesn’t work they know how to go find one that will.

Rockstar lenders know how to help you repair your credit how to find ways to manipulate data to get you better rates and terms and can solve problems when they arise. They are tenacious, resilient, and they hustle. Finding a stellar lender can open up refinancing doors for you that a regular lender cannot. Rockstar lenders become that way because great agents brought them clients.

They understand customer service and they need to go the extra mile. A rockstar lender won’t say no without proposing an alternative solution. When you find the right lender ask them about the best agent they know when it comes to finding investment property or other lenders they know that do the kinds of deals you need. They can’t do the kind of deal you need, a great lender will know someone who does.

The best way to find a great lender is to ask top producing real estate agents would they recommend. If the agent you’re speaking to works with a lot of investors they are more likely to know the lenders who will do loans for investors. Tell your agent you want to buy properties with them, but you need financing. Then ask who they know. If they don’t know of anyone ask them who they can talk to who does.

If your agent simply won’t make an effort to find you a lender look for another agent who will. When you do find a rockstar lender they often have too much business to handle on their own and have hired team members or employees that help them keep up with the demand. For many of those inexperienced in real estate this can feel uncomfortable or offputting. Try to remember it’s a good sign if your lender is doing so much business they need help.

At the end of the day, this is a business transaction and if you don’t always speak to the main lender on every phone call that’s okay as long as the transaction closes. Number three, the contractor. Rockstar contractors may not look like what you think at first. They may not answer your calls right away or be the best communicators. That’s not what makes a great contractor, at least not for an investor.

An ideal contractor for an investor is someone who understand what needs to be done, how to do it, and how to save you money on it. They are the contractor who understands your business goals, not just their own. These are people who can tell you what the best plan of action for your property is before you even look into it. Rockstar contractors get the job done inexpensively and correctly.

These are the people who know when they can save you money with tile they found on sale or can make repairs the existing structural components when an average contractor would go make you buy new materials. These contractors are always looking for ways to make themselves money by saving you money. They understand your needs. Great contractors can communicate with the city for you to get permits approved and can provide you with recommendations that other contractors wouldn’t think of. Great contractors know the best roofers, HVAC services, plumbers, electricians and more.

They are concerned about your bottom line, but they are also concerned about their own. Knowing a rockstar contractor can open up doors for you to buy deals that you couldn’t even consider without them. Number four, your property manager. A first rate property manager is someone who knows the areas you’re investing in. They manage many rental properties in the area you’re investing and they have a large sample size of properties they’ve learned from.

These people know which areas work and which do not. They will share that information with you if you let them. Rockstar managers likely own properties themselves and that’s why they get into property management. They have access to the best handymen or repair crews because they’ve been looking for them for their own properties.

They can be an excellent source of referrals for you and they can also often times be an underutilized deal source. These property managers know other investors who want to sell before anyone else does. They are the ones managing those properties. Top rated property managers tend to take care of your problems without getting you involved and are better at handling them than you would be yourself.

They are more experienced than you, more connected than you and more knowledgeable than you. When you find the right property manager they will teach you more about investing than you could hope to teach yourself and they make you better just from being around them. You know you have found a rockstar property manager when your first inclination is to call them when a new deal comes your way. Rockstars play with rockstars. When you’re a rockstar and you know you’re an actual rockstar, you don’t waste your time playing with mediocre bandmates.

The best will always surround themselves with top talent and demand everyone put in equivalent effort. They search for the best drummers, the best vocalists, best guitar players, everything. In my experience, top-level talent only works with loyal and honest clients. If you aren’t someone who’s serious, they’re going to figure that out pretty quickly. If you aren’t someone who’s honest or fair, they’ll know that too.

If that happens, you’ll likely find yourself kicked out of the concert and listening from the parking lot while everyone else rocks out. In the world of real estate investing that can end up costing you a lot of money. Don’t let that happen. If we already know rockstars play with rockstars start working on becoming one yourself.

Everyone asked me how do I get the best to work with me? The answer is simple. Become someone worthy of working with them. Agents are in this business for the same reason you are, to make money.

So are lenders, contractors, property managers, everyone else. Too many investors think it’s okay for them to make money, but expect everyone else to serve their needs for free. This kind of thinking will never get you anywhere, but frustrated. Top talent expects to be paid for their work and they aren’t shy to admit that. If you are too worried about what someone else is making, you’re not focused enough on the role you’re supposed to be playing in your business.

If you want the best to work with you, start acting like you’re the best. Learn to give value first. Learn to find what these rock stars need in their business or their life and bring that to them. Take the attitude of the servant first, putting your fears behind you and instead focusing on proving to them why it’s in their best interest to help you. I know this sounds counterintuitive, but it’s the best thing I’ve done to help grow my own business.

Now if you’re reading this section and think it’s bad advice, my guess is you probably trusted the wrong person in the past and got burnt for it. Don’t make the mistake you’re trying to prove yourself to mediocre or below average talent. That is the fastest way to get taken advantage of. Bad agents, contractors, lenders, and property managers will screw you over if you let them. Rockstars won’t.

Practical advice for proving your value to top level talent. If you’re looking for some easy ideas for how to bring value to core four you want to surround yourself with, here are a few that worked for me. What I found is before I could learn what others need, I had to first learn how their job worked. Once I figured that out it became apparent how I could help each person.

Trying to bring value to someone before you recognize their business model is an exercise of futility, but taking some time to walk in someone else’s shoes will help you find the best way to assist them. Agents, agents live by referrals. If you can send an agent business, you will be making them money. That is going to lead them to be very loyal to you and make them very happy.

An easy way the send referrals is by talking to your friends about real estate and sending the serious buyers to the agents. Start an online blog, meet up, discussion group, or chat room and send interested buyers to the agents you want to make a good impression on. This will help people remember to send you deals as well as score you points with agents. Remember to only send serious buyers do the agents. Sending them quote referrals who have no intention to buy, but instead only want a free education is a great way to prove you bring work without pay, not the reputation you want.

Communicate openly with your agent. Tell them exactly what you’d like them to do and share your thoughts. Agents want to help you, but they can only do so if you know what kind of help you want. Take it from me, as an agent.

This one is big. Give them great reviews online. Give your agent a great review on Facebook, Zillow, Yelp, or Google can earn you some major brownie points. Call your agent’s boss and tell them how great they are. Find out who supervises them and give them a great review. Ask them what they need in their business and help them find it. If they work with alot of investors, they may very well need a solid handyman to fix dry rot or a great roofer who doesn’t overcharge.

If you can give them a referral they need, you’re likely to get to the top of their list when the next great deal comes along. Give them bonuses. Yes, a note to an investor this idea seems painful. Think about it. I often buy houses for $40,000 that are completely trashed. How much is my agent making on that?

Giving them a bonus to at least help them make a decent amount of money is a great way to stay in their good graces. Lenders, lenders also want referrals. Send your friends their way. Online reviews, this works for lenders too.

Let their boss know you appreciate their hard work. Introduce lenders to websites like BiggerPockets.com. Many lenders don’t realize there are entire communities of people out there who are looking for an investment property and need a lender. Check in with them once you’ve introduced them to BiggerPockets and see if they’ve gotten any clients.

It never hurts to remind someone what you’ve done for them. Give them great references to rockstar agents. This is how lenders get their deals. If you do this, they’ll love you for it. Give them a shout out on social media. Let everyone know how great they are by tagging them in a nice post and make sure they see it too.

Contractors, pay them on time. Seriously, just do it. You have no idea how much this means to a contractor. Pay them in a way that isn’t a pain in the butt for them. I found wire transfer to be the easiest. Don’t ask them to work for free.

If you want additional work done ask them how much more it will be and make your decision accordingly. Don’t micromanage. Nobody likes that. Don’t beat them up over little things like $10 off on the paint quote. They’ll remember and they’ll return the favor.

Ask them questions. Some contractors are willing to do certain jobs, but don’t enjoy it. Things like laying tile as opposed to laminate. If it doesn’t matter to you, have them do the laminate instead so they know you have their back. Ask them what work they’re doing and what they are contracting out.

They can give you better prices on the work they do themselves. It puts them in a bad position when you want them to reduce the price significantly for work they are subcontracting to someone else. They won’t feel comfortable negotiating someone else’s money. Don’t ask them to bid jobs if you’re not serious.

If you do, pay them for their time. Sending someone to bid a job when you weren’t likely to buy the property and not paying them is a great way to let them know you are not a rockstar. Send them referrals whenever practical. Send them leads for people they can hire.

Contractors are always looking for new employees and often frustrated with the process. If you know of a hard worker who is dependable, let them know. Property managers, send them referrals. Are you noticing the pattern here? People love referrals.

Ask them what investors do that makes their job harder and try to stop doing it. Read the actual management agreement and address the issues you see before signing a contract with them. Don’t be that person who throws a fit when you’re charged for something you didn’t bother to look at first then blame them for it. Don’t call them incessantly over unimportant things.

Property management is a low-pay time-consuming job. They have to be very careful with their time. Show them you respect that. Ask them about properties before you buy them.

Get them involved in the process and rely on their expertise early on. If the house doesn’t rent for what you thought it would don’t automatically blame them. They can’t control the market. Reply to them in a timely fashion like you’d want them to reply to you.

Find other investors and introduce them to the property managers. They’re always looking to grow their network. Find out if they are licensed and if they are, let them find you deals. This is good supplemental income for a lot of them. Tell them what you need so they can be on the lookout for you.

Communication here it is also essential. Finding ways to bring value to others is one of the most important business skills you can learn. Considering that one good property can bring you hundreds of dollars in monthly cash flow and tens of thousands of dollars in equity it becomes apparent just how much money you can lose by not treating people well. In business there is a popular maxim. Your network equals your net worth.

Relationships bring and build business. Understanding the rockstars know rockstars concept is the first step in finding good talent to help you accomplish your goals. If you want to work with the best, you need to be the best. Finding a rockstar is better than finding a deal because they can bring you many deals. The search for talent should be number one on your list when looking for great deals in the acquisition stage of your investment cycle.

Brandon: All right, and that was today’s half episode of the BiggerPockets podcast. Hope you enjoyed that little excerpt, excerpt of the BRRRR Book. Make sure you pick up a copy of that. Just go to BiggerPockets.com/BRRRRBook.

That’s BRRRR with four Rs. You can also just go to BiggerPockets store or you can check it out on Amazon or Barnes and Noble or you could just drive to David’s house and you know get a copy from there. Don’t do that. Thank you guys for being a part of the BiggerPockets Podcast. Make sure you’re following BiggerPockets over on all the social networks that you normally would @BiggerPockets and follow David over @DavidGreenee24 on Instagram.

Let’s blow up his Instagram today. With that, I’m going to take off. Thank you so much for David author man Greene. My name is Brandon, signing off.

You’re listening to a BiggerPockets Radio. Simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing without all the hype you’re in the right place. Be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online.

 

 

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 180,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

6 Comments

  1. Daniel Nunney

    Great podcast. Quick question- how have you guys gotten around the 6 month seasoning period for Fanny/Freddie 30-year fixed cash out refis? We seem to be getting stuck with lenders with either (1) wait 6 months for 75% LTV OR (2) get the lower of the purchase price vs. 75% LTV as delayed financing. Any suggestions?

    • Todd Willhoite

      Portfolio lenders do not have to require the 6 month seasoning requirement, but will probably be a little higher interest rate and a variable rate. If you are looking for lower interest rates and 30 year fixed mortgages, then Fannie Mae will require the 6 months of seasoning, although I have heard people say there is a way around it, my local banks require it.

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here