Getting ready to do my first BRRRR. Any advice?

[Justin Miller]

I own a couple local properties in Denver I long-term rent. I also have a condo in Chicago I mid-term rent when I'm not using it for the summer. But I've been wanting to buy more and never figured out how. 

Recently I realized I could tap the equity in my primary residence with a HELOC and decided it was time to start investing this year in BRRRR since I want to try and do it again every year. After doing some research I've chosen Pittsburgh for the location and will drive out there in a couple of days to meet with a real estate agent and contractor to view a couple places.

I'm not sure how others get started. I just do a ton of research. But I'd love advice and suggestions as I start down this long road. Being a landlord and even a remote landlord is not new to me. Nor is the renovation process. But everything is in order to get my money out in the end so I can do it the next year or just six months later.

[Jeremy Taggart]

@Justin Miller Single family homes typically present the most opportunity for BRRRR deals here. You tend to see more of those versus multis where you can be all in (purchase + rehab) for <80% of ARV on something where you can go in and be refinanced within 6-12 months. Most of the multi deals end up being multi year BRRRRs since less of those are fully vacant ( in the good areas) and ready to rehab while also having the equity margin.

Downside is the single family homes won't really cash flow much after the refi assuming you are refinancing at 70-80% LTV with todays interest rates. The multis will but it's tougher to get the equity position on those.

A strategy I like is doing a BRRRR with a single familiy and then eventually planning on selling the single family and trading the equity in for the down payment on a cash flowing multi down the road. Making it 2 steps instead of 1 like you used to be able to do when you could cash flow and get 20%+ equity on the same property.

Typically will have to focus on areas with ARVs of 150-225k to stay in the correct rent/price ratio on the backend while still providing for enough margin to get equity. If you go below 150k ARV neighborhoods those can be tougher if something unknown pops up on the rehab along with being a little harder management wise on the backend. If you go too high in ARV those tend to make more sense as flips rather than holds because the rent/price ratios start to fade.

I'm also a fan of 5+ unit BRRRRs because of how those are valued based on NOI and cap rates but just won't see as many of those as you will on single family.

Regardless, because of the older housing stock and lower prices Pittsburgh presents a lot of opportunity to make money in value add investing if you are willing to put forth the effort and time.