Investor · Fontana, CA · Member since 2017 · 33 posts · 14 votes
Hey Guys,
I sold my rental house , cashed in about 100k capital gains on it. Got my real estate license this year. I am trying to figure out the best possible way to invest in flippers using the BRRR strategy. I am in SoCal and have been looking at foreclosures, REO's in my area. I need a plan to make the most of my available liquid cash of around 150K. Any suggestion?
Ashish Brar
Would you consider doing a JV, in South Florida? I'm currently looking to acquire an apartment complex in broward county, FL. If you are interested PM and let's discuss. I look forward to hearing from you soon.
Regards,
Ashish Brar
Would you consider doing a JV, in South Florida? I'm currently looking to acquire an apartment complex in broward county, FL. If you are interested PM and let's discuss. I look forward to hearing from you soon.
Regards,
Hey @Ashish Brar...what do you mean by "invest in flippers using the BRRR strategy"? Long term flips? What is your end goal? Active or passive or a mix of both?
@Justin Jocewicz I think I would be doing both a passive using BRRR strategy and do a flip is possible with a foreclosure/auction or an ROE . So possibly one of each. I am not sure if that's possible / doable . The hardest part would be finding REO's in my area with purchase price of around .7ARV.
Sounds good @Ashish Brar. Identify the neighborhoods you would like to have each one and start looking. Leverage will allow you to do both depending on the purchase price. 70% ARV on anything on the MLS is a lofty goal. Check out what people are paying in your market from closed homes in the past for where you want to be and figure out what is a good offer price.
I know of a great investor group you can learn from in Claremont! They will definitely have some more local options for you to invest your money and get further educated. If you're interested, message me and I can get the details to you. Thanks!
I am thinking of doing a 1031 deferred exchange - rental property to gas station with property or rental apartments using BRRR strategy near Arizona state university in Arizona. What do u guys think ?
If anybody knows good realtors and commercial brokers near tempe or phoenix, please PM me.
I am thinking of doing a 1031 deferred exchange - rental property to gas station with property or rental apartments using BRRR strategy near Arizona state university in Arizona. What do u guys think ?
If anybody knows good realtors and commercial brokers near tempe or phoenix, please PM me.
Suggestions always appreciated.
Regards
1031 exchange is usually highly recommended, PROVIDED that you don't let its time constraint panic you into paying too much for your exchanged deal/s. The clock IS ticking, right?
[Not official tax or investment advice]. Your posts indicate to me you're on the right track. Cheers...
To piggy back off this thread I have a question as well that hopefully some of you more experienced investors can help me with. Let's assume someone has $150k cash to invest like the OP suggested that he has. Is it better to buy a property cash and then do a cash-out refinance down the road to pull that money back out (assuming the logistics and numbers work) ultimately saving on interest and points and holding costs? Or is it wiser to spread that $150k cash you have to invest among 20% down payments on multiple properties so that you can scale quicker?
@Brian Garrett I ask this question in my head all the time. I finally bit the bullet and hired a CFP to run reports for me to look at each scenario. It's not cheap, but it helps me look at the bigger picture.
@Ashish Brar I have some spec builds up in Redding looking for investment. Still far from you, but hey, it's CA still right? ;)
@Brian Garrett Sorry about that, I should have said something more. The answer is, it depends.
I know that's not what you want to hear, but it's deal specific, and depends on whether or not you want a smaller margin cash-flow, or try for a larger and maybe quicker return. Not to mention that anticipating appreciation in the model is basically educated gambling. Speaking from what my model showed us, it was better to look at investing in one spec home with the larger single investment rather than dealing with a bunch of properties.
Arsish brar I am also in Southern California looking for a investment like you. I am working with a realitor here in Temecula if you want to learn with us and maybe meet some bigger pocket members.
I assume you are actively overseeing your acquisitions and you are reducing risk by doing 200 mile radius deals, in order to learn by seeing. Seeing walls opened up to see additional cost is a sobering lesson. Since I'm older, passive income without losing principle over the long run for a portion of your funds and some in the more risky pig in the poke rehabs makes sense. Just diversify knowing slow but steady growth allows sleep and the more risky provides adrenal stimulation and a reason to be excited. Being excellent in both takes time and experience. your ltv borrowing and lending (exposure) must remain low enough to remain in control. private lending on non rehab properties is one of the safest. buying all cash rehabs, your cash is the the most risky. Leveraging 20% down on your own rehabs is spreading yourself thin unless you are used to the pace of overseeing 5 construction fiascos at a time in all different phases as it can be daunting. Good luck in choosing what fits your skills. It requires your decision on your capabilities and is the reason we are entrepreneurs. if i can help, pm me.
@Brian Garrett@Josh Cuthbertson Maybe I'm oversimplifying but wouldn't time value of money theory always favor leverage over paying cash up front so long as you're net cash flow positive? The greater your equity investment and the longer you wait to take it back out, whether factoring in appreciation or not, the lower your IRR. Yes, cash flow without debt service would be higher, so there are lifestyle and personal goal considerations, but speaking strictly from an investment return perspective using leverage is more attractive. Also, in this interest rate environment you're taking on considerable interest rate risk by counting on a future equity out refi at the same or lower borrowing rates, and there is an implied cost to that risk.
@Brian Garrett@Josh Cuthbertson Maybe I'm oversimplifying but wouldn't time value of money theory always favor leverage over paying cash up front so long as you're net cash flow positive? The greater your equity investment and the longer you wait to take it back out, whether factoring in appreciation or not, the lower your IRR. Yes, cash flow without debt service would be higher, so there are lifestyle and personal goal considerations, but speaking strictly from an investment return perspective using leverage is more attractive. Also, in this interest rate environment you're taking on considerable interest rate risk by counting on a future equity out refi at the same or lower borrowing rates, and there is an implied cost to that risk.
Makes sense and there's some valid points here. Remember though the cash would only be tied up for 6 months at most since this is a value add play ultimately creating forced appreciation (when done correctly) so this isn't the same as putting a big amount of cash into a buy and hold project where you wouldn't be refinancing that cash back out for an extended period of time.
Not to dismiss the fact that leverage has it's own risks. Scale can help mitigate concentration risk, but not eliminate it. If you find yourself with a bunch of leveraged properties sitting vacant, it's going to hurt a lot more than a single un-mortgaged property. There is no free lunch.
@Brian Garrett Good point and understood. The same rules should apply, though, so long as the cost of debt is reasonable. Maybe others have factored in risk-weighted returns, but I'm a newb and not that fancy yet :)
Hey Ashish Brar ! I'm currently a real estate agent in the Phoenix area. I live in Tempe near ASU and know the area well. I also am an investor who rehabs most of the properties ourselves with a hand picked crew of firefighters. I have contacts out here as well. If you, or anyone else on this thread want/need advice, then please do not hesitate to message me! I'm glad to help and give advice in the Arizona market.
Hey, @Garrick Oconnell. Yes I have before. Not something I'm big on though. If I come across a property when I'm already leveraged too far out, I'll go ahead and wholesale the property to another investor
@Brian Garrett Why limit yourself to one property? With $150k you could probably do about 6 properties using non-bank financing and selling them to tenant buyers and recovering your initial investment on each one within a month or two, which allows you to move onto numbers 7 - 12 and so on. Also, you have to consider the costs of rehabs if you choose to rehab. There is no real estate agent involved in selling to tenant buyers so you save their 6% commission fees. To me it is all about safety (notes secured by real estate), "turns" (not flips, but the number of houses I can find off market, clean up but not rehab and then sell to tenant buyers, getting a substantial down along with cash flow) No rehabbing, no replacing roofs or AC units etc. Less risk, more profit, less work.
@Brian Garrett Why limit yourself to one property? With $150k you could probably do about 6 properties using non-bank financing and selling them to tenant buyers and recovering your initial investment on each one within a month or two, which allows you to move onto numbers 7 - 12 and so on. Also, you have to consider the costs of rehabs if you choose to rehab. There is no real estate agent involved in selling to tenant buyers so you save their 6% commission fees. To me it is all about safety (notes secured by real estate), "turns" (not flips, but the number of houses I can find off market, clean up but not rehab and then sell to tenant buyers, getting a substantial down along with cash flow) No rehabbing, no replacing roofs or AC units etc. Less risk, more profit, less work.
Hey Ken I'm not familiar with the strategy that you described but in order to do 6 properties in my market with $150k they would have to be very very low quality properties. Even if you were to use the cash strictly for 20% down payments I think you would only be able to get maybe 3 deals (SFH) around here at best. Personally with my capital that I have saved I'm looking to do flip and BRRRR deals and maybe some hard money and/or private money lending as well. Would your answer/opinion change at all if you were to be using the money for flip and BRRRR strategies?
As one example, I just bought a $225,000 property in Mesa for $100 down, $500 cleaning expenses and I took over the payments. No bank involved. I got $25,000 from the Tenant Buyer who is now taking over the payments plus some positive cash flow. No real estate agent involved, so no fees there. There is about $20,000 in equity I will get when the tenant buyer refinances or sells. Here's another one, I taught my joint venture partner in Austin and last month he put $100 down on a 4 year old house south of Austin. Our "buy in" is to take over the $185,000 loan and give the sellers a few thousand to move. We bought it, and we now have it on the market for $240,000 One guy offered to put $40,000 down. No bank, No realtors involved, so no fees. This can be done remotely, anywhere. Why EVER would you put 20% down? Most flips across the country average $15,000 profit if memory serves. That sounds like too much risk and too much work to me, for such little profit. If you want more examples email me. Not enough room here and people's attention drifts when posts get too long.