Can (or should) first time investors BRRRR?

Question

No preconceived notions here, just want to hear from some different perspectives! Can, or should, first time investors BRRRR?

When I started building a 5 year plan for myself I thought it made sense to buy my first property and BRRRR it since I want to get in at a low price point and force equity/refi so I could buy a second property faster than by saving up with my W2. But after speaking with a local investor-agent, he felt pretty strongly that a first time investor should just scratch BRRRR from their vocab and buy something nearly turnkey, collect the steady drip of cash flow for a few years, and save up for property two via W2, and then start to think about BRRRR. In fact, he's been doing it about 20 years himself and only just started getting into BRRRRing I guess.

I've consumed enough podcasts, courses, etc to know that there's many paths in and a lot of it is dedication and due diligence.

But curious if there's any other strong opinions out there. Do you agree? Or do you think BRRRR is feasible for a first timer?

David M. · Answer

@Holly Ross

Yeah, its a catch -22 position. If you don't brrr, you basically can't do another deal. However, brrr still brings on more risk, more complication. First, you need to find a deal that will get to close to doing a full brrr. If you can get it, then you actually have to brrr it. Now, this is like a flip / remodel. Most newbies don't have the experience, ability, or resources/connections to have the remodel done well or within costs.

So, with doing the brrr you can get yourself into a worse position, e.g.: the remodel costs underestimated, time to complete under estimated, potentiall poor contractors, switch contractors, etc. Also, newbies have limited experience in with financing so the refi may be later than planned.

Generally, I think its somewhere between a bad idea and maybe just a "trial by fire" for the newbie to learn about a remodel and don't necessarily expect to do the brr well. Sure, maybe you'll get lucky...

Also, most people are busy with their existing day jobs and lives. Many don't have the time to deal with this extensive work. How many regular homeowners want to deal with remodeling the kitchen in their own home? Its a weird contracdiction to me how supposedly people are busy with family and work, but hav time to spend so much time "investing," which is supposed to be passive and not a job.

Hope this helps. Happy to chat. Good luck.

Jake Baker · Answer

@Holly Ross

My first property was a primary residence that I house hacked. Second property was a rental property that needed $8k in repairs. Third property was a flip that made a modest return. Now we do 20+ flips/brrrs per year and raise money for them. The point here is that you don’t have to start off with a grand slam.

This approach served me very well as I never got too over my head with my investing.

Logan Laperriere · Answer

Hi Holly,

Congratulations on building a 5 year plan for yourself! Having goals and a plan to achieve them is crucial to being successful.

Do you have and prior experience with renovations or connections to local contractors?

I understand where your agent is coming from, turn key properties are potentially less risky for beginners. It sounds like your goal is to build your portfolio quickly, that takes capital. BRRRR is a great way of recycling the same capital into new properties. It does come with the risk of rehabs going over budget. Additionally not every deal will allow you to pull all of your capital out, you may need to flip some of the properties to fund your new purchases. Feel free to reach out, I am happy to chat.

Cliff Benner · Answer

I tried to BRRRR my first one, made so many mistakes and haven't been able to purchase another since i bought it 09/2021.

It taught me a lot on business and I have purchased a business with seller financing in the mean time but it's been hard to expand my real estate with all the money I had to put in. Should be able to get rid of bad debt this year, then I could do another one, but regardless on how you decide to move forward; find a good team first, then trust but verify everything, question their answers and demand proofs on ARV, rent amounts, any numbers. Then if you are Out of State, fly there, spend that money.

$1,000 trip would have saved me $45,000

Check out episode #610 of the BP Podcast to hear what I did wrong and the advice to move forward/how to avoid it.

Can (or should) first time investors BRRRR?

Can (or should) first time investors BRRRR?

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