Brrrr strategy going well?

Question

Hello REIs!

Are there new Brrrr folks who are still proceeding despite not being able to pull out most funds?

Nathan Gesner · Answer

I have to disagree with John. Property values are already dropping around the country and most experts predict we will continue to see drops through 2023. The bottom is likely to be 10 - 20% below peak prices in June 2022. Nobody knows the future, but I wouldn't gamble on price growth in 2023.

Rich Hupper · Answer

The brrrr strategy is great but it is more difficult to achieve with less units. Also you need to get the properties at big discounts especially if there is a lot of rehab needed to get it occupied. Brrrr would work better if lenders made loans up to 95% or 100% ltv but the most they go is 80%. So ......

ARV *.80 - ( rehab + holding) = purchase price. Even if you don't need to leave money in the project, the project might not cashflow because you paid too much on the purchase or rehab.

Its a tricky strategy that works well with single families you get at a huge discount, or multi unit buildings with 5+ units that can service larger loans.

I am trying to brrrr a three family right now and I think I might be able to get by with no money left in the property and still cashflow, but I am utilizing historic tax credits and government grants to offset the costs.

Eliott Elias · Answer

I am BRRRR'ing and pulling out most my funds

Jay Thomas · Answer

You need to buy properties at significant discounts – usually when there's a lot of rehab work needed before they can be occupied – in order to make the most out of this strategy. When done correctly, you can take advantage of your initial investment and use debt from the loan to help fund renovations. Then once the property is ready for tenants and begins generating income, you can refinance the loan and receive cash back that was used for repairs. This allows you to repeat this process again with another purchase—allowing for even greater returns on future investments. With enough planning and research, it’s possible to successfully execute the brrrr strategy and build wealth over time.

At the same time, it is important to be aware of some of the risks involved with this strategy. You need to purchase properties that have a low enough price that you can make money off of them while still allowing you to cover your repair costs. Additionally, it’s important to factor in taxes and other fees associated with loan refinancing as they can significantly increase the overall cost of your investment. If you are properly prepared and aware of these risks, however, it is possible to thrive using this approach. The brrrr strategy is an excellent way for anyone looking to grow their wealth through real estate investing. With careful consideration and research, you could find yourself well on your way to financial freedom.

Good luck!

John Clevenger · Answer

It's certainly difficult to get properties to BRRRR perfectly however it's not impossible. As Rich stated, getting properties at a discount is key to making this happen. With that being said there are some other creative ways to quickly scale your portfolio without a perfect BRRRR.

I'd highly recommend listening to Episode 644 of the BP podcast (https://open.spotify.com/episo...). Chad Beeman explains his strategy in scaling, and how to navigate pulling all of your money out of an imperfect BRRRR.

Finding partners is key!

John Mathew · Answer

The record level of home appreciation in 2021 is expected to continue throughout 2022, although maybe not quite as much. But since demand is expected to remain high, interest rates low, and supply not yet caught up with demand, it seems to be a pretty good bet to predict a house bought today will be worth more at this time next year. With home appreciation comes equity, and with equity can come your refi strategy and next investment opportunity.

BRRRR works just as well now as it always has, despite the increase in housing and renovation costs. Just remember to run your numbers on any potential investment, such as cash flow and cap rate.

Brrrr strategy going well?

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