How to Scale without rehabbing (BRRRR)... starting with 400k
Member since 2023 · 9 posts · 7 votes
How to Scale without rehabbing (BRRRR)... starting with 400k
Most Popular Reply
Member since 2018 · 1k+ posts · 1k+ votes
2yQuote from @Quinn Dudek:
We would preferably not rehab and BRRRR as it causes complications and we are new. How would we scale this or potentially 1031 exchange into a larger deal (commercial)? Waiting for equity build up and appreciation and then cash out refi to buy a few more homes is a possibility but that may take quite a while.
You do not want to take active steps (rehabbing is an active step). Therefore you are left with the effects of passive market changes leading to appreciation. You do not, however, appear to want to wait for ordinary market appreciation.
You are left with buying properties under market price. That leads to your answer: What are you doing to find owners who are willing to sell under market?
Don’t look for distressed properties, look for distressed owners. That’s the only strategy that fits the limits you have imposed on yourself.
27 Replies
- Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes2y
Everyone is different. BRRR's is great because you can find deals and rehab. Then you refi to pull money out. The properties will be rehabbed and fairly turn key. If you avoid rehab homes then you'll be targeting "turn key" homes. Nothing wrong with that just is a fairly simple strategy. You'll be waiting for properties to appreciate and build equity. in 2 years you can 1031 and buy more. If I had 400K I'd look into syndications or multi family. Use 400K as a DP and you'll get a solid deal. What's your background for investing?
- Member since 2023 · 9 posts · 7 votes2y
Thanks Caleb. I have no background in real estate investing. Me and some partners have funds that we needed to put to work so we have been looking into real estate rental investing the past 4-5 months
- Member since 2023 · 9 posts · 7 votes2y
Quote from @Caleb Brown:
Everyone is different. BRRR's is great because you can find deals and rehab. Then you refi to pull money out. The properties will be rehabbed and fairly turn key. If you avoid rehab homes then you'll be targeting "turn key" homes. Nothing wrong with that just is a fairly simple strategy. You'll be waiting for properties to appreciate and build equity. in 2 years you can 1031 and buy more. If I had 400K I'd look into syndications or multi family. Use 400K as a DP and you'll get a solid deal. What's your background for investing?
Why would you focus on multi family?
- Member since 2018 · 1k+ posts · 1k+ votes2yIncreases in value come from only two sources: passive market forces (appreciation), and; changes to the dwelling that you actively make that then allow market forces to affect the property differently than doing nothing would have done.
Quote from @Quinn Dudek:
We would preferably not rehab and BRRRR as it causes complications and we are new. How would we scale this or potentially 1031 exchange into a larger deal (commercial)? Waiting for equity build up and appreciation and then cash out refi to buy a few more homes is a possibility but that may take quite a while.
You do not want to take active steps (rehabbing is an active step). Therefore you are left with the effects of passive market changes leading to appreciation. You do not, however, appear to want to wait for ordinary market appreciation.
You are left with buying properties under market price. That leads to your answer: What are you doing to find owners who are willing to sell under market?
Don’t look for distressed properties, look for distressed owners. That’s the only strategy that fits the limits you have imposed on yourself. - Investor · Central Virginia · Member since 2020 · 393 posts · 253 votes2y
If you have that amount, I would just look at MFH. I would actually wait unitl the summer as many syndications are going to try to get out of bad debt and you will find some great deals.
- Member since 2023 · 9 posts · 7 votes2y
Quote from @Chris Webb:
If you have that amount, I would just look at MFH. I would actually wait unitl the summer as many syndications are going to try to get out of bad debt and you will find some great deals.
Whats the benefit of looking at MFH instead of SFH? Thanks
- Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes2y
Quote from @Quinn Dudek:
Me and a few other partners have 400k and are trying to get started with SFH. We are thinking about buying a few 300kish houses next year probably using DSCR loans. We would preferably not rehab and BRRRR as it causes complications and we are new. How would we scale this or potentially 1031 exchange into a larger deal (commercial)? Waiting for equity build up and appreciation and then cash out refi to buy a few more homes is a possibility but that may take quite a while. And I believe we may be over leveraged with something like 7 300k+ homes where a few possible vacancies and/or large unexpected payments could make it all come crashing down. What would you do if you had 400k and were looking to get into SFHs?
I'd consider looking into multi-family homes. This will increase the bang for your buck and mitigate vacancy problems. With 400k, assuming regular conventional financing, you could get 8 duplexes for 200k each. This will allow you scale very quickly. Additionally, if you invest in a market that is experiencing rapid expansion in the economic base (like Columbus, Ohio), you'll be able to refi and get into commercial much more rapidly.
- Member since 2018 · 1k+ posts · 1k+ votes2yMore baskets to get eggs from, meaning you get a more secure income source.
Quote from @Quinn Dudek:
Quote from @Chris Webb:
If you have that amount, I would just look at MFH. I would actually wait unitl the summer as many syndications are going to try to get out of bad debt and you will find some great deals.
Whats the benefit of looking at MFH instead of SFH? Thanks
- Investor · Central Virginia · Member since 2020 · 393 posts · 253 votes2yHi, yes. I did assume commercial meant MFH. If that is not the case, I would focus on SFH. If it did mean that, MFH is going to be where the deals are in 2024.
Quote from @Quinn Dudek:
Quote from @Caleb Brown:
Everyone is different. BRRR's is great because you can find deals and rehab. Then you refi to pull money out. The properties will be rehabbed and fairly turn key. If you avoid rehab homes then you'll be targeting "turn key" homes. Nothing wrong with that just is a fairly simple strategy. You'll be waiting for properties to appreciate and build equity. in 2 years you can 1031 and buy more. If I had 400K I'd look into syndications or multi family. Use 400K as a DP and you'll get a solid deal. What's your background for investing?
Why would you focus on multi family?
- Member since 2023 · 9 posts · 7 votes2y
Quote from @Chris Webb:
Hi, yes. I did assume commercial meant MFH. If that is not the case, I would focus on SFH. If it did mean that, MFH is going to be where the deals are in 2024.Quote from @Quinn Dudek:
Quote from @Caleb Brown:
Everyone is different. BRRR's is great because you can find deals and rehab. Then you refi to pull money out. The properties will be rehabbed and fairly turn key. If you avoid rehab homes then you'll be targeting "turn key" homes. Nothing wrong with that just is a fairly simple strategy. You'll be waiting for properties to appreciate and build equity. in 2 years you can 1031 and buy more. If I had 400K I'd look into syndications or multi family. Use 400K as a DP and you'll get a solid deal. What's your background for investing?
Why would you focus on multi family?
You've got my attention with MFHs. Can you elaborate on why many syndicatons are trying to get out of bad debt.
- Member since 2018 · 1k+ posts · 1k+ votes2y
Quote from @Quinn Dudek:
Quote from @Chris Webb:
Hi, yes. I did assume commercial meant MFH. If that is not the case, I would focus on SFH. If it did mean that, MFH is going to be where the deals are in 2024.Quote from @Quinn Dudek:
Quote from @Caleb Brown:
Everyone is different. BRRR's is great because you can find deals and rehab. Then you refi to pull money out. The properties will be rehabbed and fairly turn key. If you avoid rehab homes then you'll be targeting "turn key" homes. Nothing wrong with that just is a fairly simple strategy. You'll be waiting for properties to appreciate and build equity. in 2 years you can 1031 and buy more. If I had 400K I'd look into syndications or multi family. Use 400K as a DP and you'll get a solid deal. What's your background for investing?
Why would you focus on multi family?
You've got my attention with MFHs. Can you elaborate on why many syndicatons are trying to get out of bad debt.
If you are asking such basic questions I question whether you should be in real estate at all. You want quick appreciation but be passive at the same time. You want to know why people want to get out of “bad” debt. Next you’ll ask what makes bad debt bad, I reckon (think loan terms not matching property financial assumptions).
If you want investments that won’t worry your pretty little head, stick with bank CDs insured by the government. You won’t get much appreciation, but you won’t get your tother end handed to you, either. If you’re asking these questions because you legitimately don’t know the answers, then you are NOT ready for real estate - Member since 2023 · 9 posts · 7 votes2y
Quote from @John Clark:
If you are asking such basic questions I question whether you should be in real estate at all. You want quick appreciation but be passive at the same time. You want to know why people want to get out of “bad” debt. Next you’ll ask what makes bad debt bad, I reckon (think loan terms not matching property financial assumptions).Quote from @Quinn Dudek:
Quote from @Chris Webb:
Hi, yes. I did assume commercial meant MFH. If that is not the case, I would focus on SFH. If it did mean that, MFH is going to be where the deals are in 2024.Quote from @Quinn Dudek:
Quote from @Caleb Brown:
Everyone is different. BRRR's is great because you can find deals and rehab. Then you refi to pull money out. The properties will be rehabbed and fairly turn key. If you avoid rehab homes then you'll be targeting "turn key" homes. Nothing wrong with that just is a fairly simple strategy. You'll be waiting for properties to appreciate and build equity. in 2 years you can 1031 and buy more. If I had 400K I'd look into syndications or multi family. Use 400K as a DP and you'll get a solid deal. What's your background for investing?
Why would you focus on multi family?
You've got my attention with MFHs. Can you elaborate on why many syndicatons are trying to get out of bad debt.
If you want investments that won’t worry your pretty little head, stick with bank CDs insured by the government. You won’t get much appreciation, but you won’t get your butt handed to you, either. If you’re asking these questions because you legitimately don’t know the answers, then you are NOT ready for real estateI am not in real estate. I am asking questions to gain knowledge so I can get into it. Seems like you had a bad day. Hope everything's alright
- Rental Property Investor · Rochester, MN · Member since 2017 · 224 posts · 323 votes2y
@Quinn Dudek
There’s a couple books I recommend you read, then, take that $400k and put 25% down on a $1.6 million apartment building. Find something with low rents and crappy units that you can fix up and pump up the value. Don’t start buying single family homes. Those are for families. These are the two books. Enjoy.
The complete guide to buying and selling apartment buildings by Steve Berges.
Multifamily millions by Dave Lindahl.
The most important thing to remember is that you can do this.
- Member since 2023 · 9 posts · 7 votes2y
Thank you for the advice and the encouraging words. I'll give them a read!
- Real Estate Broker · Fort Worth, TX · Member since 2015 · 221 posts · 125 votes2y
I would be more than happy to speak with you guys and see if I can add some value. There are a lot of avenues in real estate. I know that as a new investor your first thought is SFR just because that seems easier. However, it is more than likely more risky and a lower ROI. You would get a higher return being a passive investor in a larger deal. With $400 it obviously depends on the market you are looking to invest in as to what you can buy. However, I would recommend MH parks or self storage. They may not seem that glamourous but they usually have a much higher ROI and you don't have to deal with tenants and toilets. I specialize in creative investing and have lots of ideas for you guys, tiny house community, RV/MH park, LP's, RV's, self storage.... If interested give me a ring and I will be more than happy to help you guys walk through a few ideas and figure out what you would be the most comfortable with that would give you the best ROI. Happy Investing!
- Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes2y
Quote from @Quinn Dudek:
Me and a few other partners have 400k and are trying to get started with SFH. We are thinking about buying a few 300kish houses next year probably using DSCR loans. We would preferably not rehab and BRRRR as it causes complications and we are new. How would we scale this or potentially 1031 exchange into a larger deal (commercial)? Waiting for equity build up and appreciation and then cash out refi to buy a few more homes is a possibility but that may take quite a while. And I believe we may be over leveraged with something like 7 300k+ homes where a few possible vacancies and/or large unexpected payments could make it all come crashing down. What would you do if you had 400k and were looking to get into SFHs?
Everyone is obsessed with scaling quickly but the truth is half the people saying that are either selling or course or selling real estate lol. Buy one property see how it goes, keep saving money from your other source of income, then buy another rinse repeat, if any on your properties sky rocket in value you can 1031 them. It’s pretty simple it’s just gonna take time & patience but you’ll be much better set for success than focusing on doors/scale.
- Member since 2023 · 9 posts · 7 votes2y
Quote from @Jack Seiden:
Quote from @Quinn Dudek:
Me and a few other partners have 400k and are trying to get started with SFH. We are thinking about buying a few 300kish houses next year probably using DSCR loans. We would preferably not rehab and BRRRR as it causes complications and we are new. How would we scale this or potentially 1031 exchange into a larger deal (commercial)? Waiting for equity build up and appreciation and then cash out refi to buy a few more homes is a possibility but that may take quite a while. And I believe we may be over leveraged with something like 7 300k+ homes where a few possible vacancies and/or large unexpected payments could make it all come crashing down. What would you do if you had 400k and were looking to get into SFHs?
Everyone is obsessed with scaling quickly but the truth is half the people saying that are either selling or course or selling real estate lol. Buy one property see how it goes, keep saving money from your other source of income, then buy another rinse repeat, if any on your properties sky rocket in value you can 1031 them. It’s pretty simple it’s just gonna take time & patience but you’ll be much better set for success than focusing on doors/scale.
Makes sense. I read about some people scaling to 20-30 properties in a couple years and never understood how unless they were taking extreme risk. Appreciate the advice
- Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes2y
Quote from @Quinn Dudek:
Quote from @Jack Seiden:
Quote from @Quinn Dudek:
Me and a few other partners have 400k and are trying to get started with SFH. We are thinking about buying a few 300kish houses next year probably using DSCR loans. We would preferably not rehab and BRRRR as it causes complications and we are new. How would we scale this or potentially 1031 exchange into a larger deal (commercial)? Waiting for equity build up and appreciation and then cash out refi to buy a few more homes is a possibility but that may take quite a while. And I believe we may be over leveraged with something like 7 300k+ homes where a few possible vacancies and/or large unexpected payments could make it all come crashing down. What would you do if you had 400k and were looking to get into SFHs?
Everyone is obsessed with scaling quickly but the truth is half the people saying that are either selling or course or selling real estate lol. Buy one property see how it goes, keep saving money from your other source of income, then buy another rinse repeat, if any on your properties sky rocket in value you can 1031 them. It’s pretty simple it’s just gonna take time & patience but you’ll be much better set for success than focusing on doors/scale.
Makes sense. I read about some people scaling to 20-30 properties in a couple years and never understood how unless they were taking extreme risk. Appreciate the advice
Extreme risk or frankly making **** up or they own 30 doors meaning they invested in 30 doors, they might own like 5% lol. It’s like saying I’m an owner of apple. Frankly while I won’t say it’s a myth because I’m sure someone somewhere has done it, scaling 30 properties in a few years without having already had a ton money or being an just an extremely low cost market is pretty close to impossible and as you said hugely risky. Tortoise and the hare lol
- Investor · Central Virginia · Member since 2020 · 393 posts · 253 votes2y
Quote from @Quinn Dudek:
Quote from @Chris Webb:
Hi, yes. I did assume commercial meant MFH. If that is not the case, I would focus on SFH. If it did mean that, MFH is going to be where the deals are in 2024.Quote from @Quinn Dudek:
Quote from @Caleb Brown:
Everyone is different. BRRR's is great because you can find deals and rehab. Then you refi to pull money out. The properties will be rehabbed and fairly turn key. If you avoid rehab homes then you'll be targeting "turn key" homes. Nothing wrong with that just is a fairly simple strategy. You'll be waiting for properties to appreciate and build equity. in 2 years you can 1031 and buy more. If I had 400K I'd look into syndications or multi family. Use 400K as a DP and you'll get a solid deal. What's your background for investing?
Why would you focus on multi family?
You've got my attention with MFHs. Can you elaborate on why many syndicatons are trying to get out of bad debt.
Yes. Keep in mind, I do not invest in them. Brian at Nuvo would be better at giving details, but many syndication bought with low debt and higher levels of leverage. They also bought at 3 and 4% rates. The average commercial loan is 5-7 years with adjustments. Even if a building maintains growth, the lending market has tightened. This means banks that lend at 20% down may now want 40% down. This could easily take any equity a syndication has away from LPs. The GPs will either how this is playing out and have two options hold with a possible cash in refi (which the LPs will have to pay for) or sell. After a few months on the market, GPs will face pressure to get LPs out of the investment and sell at a discount. DM me and i can find a few videos of where I think i heard this was already taken place and an interview with Brian explaining this. His firm assists syndications with possible bridge financing.
- Investor · Schroon Lake, NY · Member since 2015 · 26 posts · 9 votes2y
@Quinn Dudek
Instead of forcing appreciation through rehabbing, you could force appreciation through increasing NOI, ie increasing revenue or decreasing expenses.
You could also look at using creative financing.
- Investor · Central Virginia · Member since 2020 · 393 posts · 253 votes2y
Quote from @Christopher Pray:
@Quinn Dudek
Instead of forcing appreciation through rehabbing, you could force appreciation through increasing NOI, ie increasing revenue or decreasing expenses.
You could also look at using creative financing.
Yes! I would suggest trying to find owner financing if possible as well.
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes2y
Take some time and get educated. If you're going to buy a bunch of turn key SF homes, then expect low to no cash flow and equity being built based on whatever happens to the market (2-5%/year gain). I would highly suggest buying run down homes in good areas and renovating them if you go the SF route. This helps boost cash flow and has a built in equity boost.
Another route is to buy a large MF or commercial building (industrial, storage, retail). Same thing as above. Value add in a good location. Understand that this and SF's will take a lot of time and effort even if you hire a property manager.
In either case, only leverage 60-70% LTV and make sure you can hit a 1.5 DSCR
The other option is to invest passively into a syndication or fund. This allows for good returns (cash flow in the 5-9% range and full returns in the 14-18% IRR range). Going this route the biggest key is to do thorough DD on the sponsor.
- 2yJake BakerBusiness MemberFlipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 695 votes
We 15-20 flips/BRRRRs per year. If you are buying SFR be sure to budget for rehabs and CapEx. The only way to avoid any type of rehab is the buy new construction... or a very new house.
I prefer buy houses that need to be gutted because I know I will rehab it to a level where I wont need any major repairs for a long time. Or I will purchase a new build knowing that everything is new in the house.
Happy Investing!
BookkeepingRE - Bookkeeping for Real Estate & Service-Based Businesses58 Reviews - 2yRobert EllisBusiness MemberDeveloper · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
Quote from @Jake Baker:
We 15-20 flips/BRRRRs per year. If you are buying SFR be sure to budget for rehabs and CapEx. The only way to avoid any type of rehab is the buy new construction... or a very new house.
I prefer buy houses that need to be gutted because I know I will rehab it to a level where I wont need any major repairs for a long time. Or I will purchase a new build knowing that everything is new in the house.
Happy Investing!
or build a new house! looked at that Jake?
Section 8 Launch52 Reviews - Investor · Central Virginia · Member since 2020 · 393 posts · 253 votes2y
I am not sure if BP will let me post this, but it does validate my thoughts above.
https://fortune.com/2024/01/22/billionaire-ceo-commercial-re...
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