How to execute BRRRR remotely? Looking for help getting started.

26 Replies

I am ready to begin the process to liberating myself from the 8-5. I have a plan in place and a set of fairly specific criteria in order to get there. Here it is at a glace:

* 3k in monthly cash flow = 15 properties at $200/month or 20 properties at $150/month. Am open to larger properties (such as 10-unit+ apartment complexes, etc.) but do not think I could currently qualify for a loan on such a property at the time of refinance (assuming BRRRR), even if I could find a private investor to make the original purchase for me.

* Looking at BRRRR strategy as a way to more quickly scale property acquisition due to limited capital

* Seeking private investor to assist with increased property acquisition as time progresses

* Ultimately seeking passive investments that require little to no attention which will provide income stream

* Looking to accomplish 3k of passive, cash flow income within the span of 3-5 years

I have a few obstacles as I perceive them. For one, I don't have a ton of capital. I have about 30k of my own money saved up right now. Turnkey is attractive, but I don't want to blow it all on one or two properties and then not have any cash to continue the process with while I continue to work another 1.5 years or so to save that amount up again. That would significantly delay the timeline in terms of achieving my goals. To that end, the BRRRR strategy seems most advantageous, to me, so that I could keep re-using the same chunk of money over and over. Furthermore, finding a private investor, or perhaps at first, using hard money, also sounds like a good option in order to scale property acquisition more quickly.

Another obstacle is that my town is not good for cash flow. Investors in the area tell me that you are doing well to get a property that cash flows 200 bucks after the mortgage payment, taxes, and insurance. They're not even including any variable expenses when they say this (vacancy, repairs, cap ex, property management). So unless I have stellar deals, investing in my own town seems like a poor choice given the landscape here.

Which leads me to my next obstacle; figuring out how to invest out-of-city/state. Sure, I can pull up the MLS and browse properties anywhere in the US, but there are so many places to choose from; I have literally no point of reference in terms of where to start. Furthermore, while deals can (apparently) be found on the MLS in certain areas, it seems to me that being networked with wholesalers and other investors in the area is a big deal in terms of getting good deals. So how exactly am I supposed to network with people in a remote location hours away from me? My first thought would be to figure out when/where the local REA is meeting and take a day or two off from work to attend and network... Other than that, I have no idea.

Finally, if I want to execute BRRRR in a remote area, I will need to figure out how to find/use subcontractors. I haven't even yet addressed this in my own town (figured out who I would use), let alone another area. This may be solved by networking as described in the earlier step, but it seems like another separate issue as well.

All in all, I feel like there are a lot of obstacles to overcome in order to begin on this journey. I need to be able to acquire at least 4 properties per year that cash flow at least $150-$200 after all expenses. And I can't do this in my own town, at least not readily. So I'm not entirely sure what the next step is at this point.

If I could purchase a property in my town for a price that would accommodate the rehab budget, and all other expenses, and leave me with $150 - $200 in cash flow at the end of the month, I'd be doing it right now. I have all of the resources and support system here in my town to make me feel comfortable with pursuing this immediately. However, on the properties that cash flow in my town (typically 50k and below SFH), there just isn't enough meat left on the bone. Capital expenses seem to be the killer here, since they aren't so directly correlated with income. So cap ex on the smaller properties takes a much bigger chunk out of the cash flow than on relatively similar properties in other areas with higher rents, and thus, a higher gross income.

I would caution against trying a BRRRR out of your area, especially on your first deal. There are so many things you need to learn by being a rental property owner, and I just think having to go through the whole learning curve while doing it out of area AND doing a rehab...it's just too much.

I bought a few local properties, then bought a few turnkeys, then tried BRRRR out of area. And the BRRRR's did not work out well for me. I'm not saying it can't work or that there's zero chance it can work, but you just need to be very careful.

So that being said, if you still want to do it, you absolutely need to have a stellar team. Wholesaler, contractor, property manager, and lender. I got hung up on the lending side, specifically with appraisals coming in way too low. I would line up your lender BEFORE the purchase (this applies to any purchase, whether it's BRRRR or turnkey).

Originally posted by @Kyle M.:

I would caution against trying a BRRRR out of your area, especially on your first deal. There are so many things you need to learn by being a rental property owner, and I just think having to go through the whole learning curve while doing it out of area AND doing a rehab...it's just too much.

I bought a few local properties, then bought a few turnkeys, then tried BRRRR out of area. And the BRRRR's did not work out well for me. I'm not saying it can't work or that there's zero chance it can work, but you just need to be very careful.

So that being said, if you still want to do it, you absolutely need to have a stellar team. Wholesaler, contractor, property manager, and lender. I got hung up on the lending side, specifically with appraisals coming in way too low. I would line up your lender BEFORE the purchase (this applies to any purchase, whether it's BRRRR or turnkey).

Hi Kyle -

Some good advice here.

I hear all of that, and it is what I'm afraid of, as well. Like you said, there are many things that can go wrong, and its especially daunting given that I have no networking in any other area than where I live. At least here in Springfield, I know several investors who can refer me to the right people if need be, and I feel confident investing here.

Except, the cash flow just isn't that great here. So, what am I supposed to do? I can't buy a few turnkeys because that requires downpayment and if we're talking 10k-20k per turnkey, I'm going to run out of money before I get my second property. And I can't exactly practice the BRRRR locally because, well, I would be wasting my money on a deal that doesn't cash flow the way that I want it to.

Where does that leave me? That's the conundrum I'm currently finding myself in. My ideal situation would be to either save up to 50k-60k or enough to do a BRRRR all by myself, and then churn out 4 or so properties a year by re-using the same chunk of money over and over, pulling it back out at the refinance each time. That, or to find a private investor who will let me use his/her money to do the same. Or, I could pursue hard money whilst working towards the former two options. I'm ready to go, and to make something happen, but I'm not going to waste my money on bad deals (for me) here where I live. I just don't know how to proceed otherwise, specifically because of the concerns that you mentioned.

House hack, you're going to have a bad time if you only have 30k saved up. Think about it like this, a 100k house going to get you at or around 1k mo rent. It's going to cost you almost 700 if you hire out a prop mgmt company 600 or so if you don't.  That'll take 20k, but don't forget you'll have closing costs and commissions as well. Then you have to get it rent ready and if you hire out to a prop mgmt company you're losing 1st mo rent to them for commision. 

So, you went from 30k, down to 20k, let's say 5k for closing and upgrades to get it rent ready. Now you have 5k, it's almost winter so let's say you have 2 months of vacancy (600-700 mo) let's round that and it say it's a 1k.  Now we are down to 4k, but you don't get first mo rent... so another 700 gone.

Now, we're starting off with 3,300.... what happens when you hit a patch of bad luck? How will you pay for repairs, your insurance deductible, maintenance ext? You're only making 300 after basic expenses... you're not going to really build up much capital that way and if you paid at or near retail you have no room to do HELOC or cash out. Even if you did those have fees and are only good for 80% MAX of value.

Now let's pretend your tenant stopped paying rent, put some holes in the wall and destroyed the carpet. You need 5k to get it rent ready and haven't been paid for 2 months. How you going to do that and keep paying the mortage? 

Originally posted by @Matt K. :

House hack, you're going to have a bad time if you only have 30k saved up. Think about it like this, a 100k house going to get you at or around 1k mo rent. It's going to cost you almost 700 if you hire out a prop mgmt company 600 or so if you don't.  That'll take 20k, but don't forget you'll have closing costs and commissions as well. Then you have to get it rent ready and if you hire out to a prop mgmt company you're losing 1st mo rent to them for commision. 

So, you went from 30k, down to 20k, let's say 5k for closing and upgrades to get it rent ready. Now you have 5k, it's almost winter so let's say you have 2 months of vacancy (600-700 mo) let's round that and it say it's a 1k.  Now we are down to 4k, but you don't get first mo rent... so another 700 gone.

Now, we're starting off with 3,300.... what happens when you hit a patch of bad luck? How will you pay for repairs, your insurance deductible, maintenance ext? You're only making 300 after basic expenses... you're not going to really build up much capital that way and if you paid at or near retail you have no room to do HELOC or cash out. Even if you did those have fees and are only good for 80% MAX of value.

Now let's pretend your tenant stopped paying rent, put some holes in the wall and destroyed the carpet. You need 5k to get it rent ready and haven't been paid for 2 months. How you going to do that and keep paying the mortage? 

Hi Matt -

Very good points. Forgive me if I didn't explain myself adequately in the posts above, but suffice to say that I would never purchase a house with that purchase price to rent ratio; at least not at the price of 100k. If we're talking 200k, then maybe, because expenses will probably not linearly increase with the purchase price, thus allowing for increased monthly cash flow.

Secondly, even if I did decide to go for the 100k house, I certainly wouldn't sink 20k of my hard-earned dollars into it. I would only do this deal if I was able to purchase the property for ~50k (either via hard or private money), assuming it needed 20k worth of rehab, and appraised at 100k, thus allowing me to cash out and pull the initial investment plus fees back out. The whole time I would retain my 30k for the purpose of cash reserves to be used when and if any number of those things you mentioned were to happen.

So, in short, I realize and understand the importance of cash reserves, and will not leave myself without. That means that I will either be saving up to a larger amount (50k+), and/or using hard/private money to finance deals via BRRRR strategy.

@Lucas Mills , I just looked up Springfield MO on Zillow, and there are HEAPS of properties going in the $30-40k range. Are you saying NOTHING nearby will cash flow, even theoretically? What's wrong with EVERY one of those properties?

ie. Is the grass ALWAYS greener elsewhere? Your plan looks solid, but - get out there, knock on some doors! Cheers...

Originally posted by @Brent Coombs :

@Lucas Mills, I just looked up Springfield MO on Zillow, and there are HEAPS of properties going in the $30-40k range. Are you saying NOTHING nearby will cash flow? What's wrong with EVERY one of those properties?

ie. Is the grass ALWAYS greener elsewhere? Cheers...

Can give me the link to a specific example of a property that seems like it would cash flow well? I'll analyze the property and perhaps you can give me some feedback on it?

There's a certain investor here in Springfield that I meet with on a fairly regular basis, he's been incredibly helpful to me in understanding the Springfield market, getting started, etc. He himself has told me that I will likely have a difficult time getting properties at the price that I need to, considering the amount of cap ex that I want to set aside from the cash flow each month. The difference in cap ex is essentially what makes Springfield viable for him, but not viable for me. But, he has another business on the side and is ok with wholesaling a house to help cover an expense. I just don't want to have to worry about that. This guy wholesales ~2 houses per month, on average. He's got some rental properties as well. I think he's got a pretty good handle on the market here, and I've also seen it myself when analyzing properties.

Originally posted by @Lucas Mills :
Originally posted by @Matt Katsaris:

House hack, you're going to have a bad time if you only have 30k saved up. Think about it like this, a 100k house going to get you at or around 1k mo rent. It's going to cost you almost 700 if you hire out a prop mgmt company 600 or so if you don't.  That'll take 20k, but don't forget you'll have closing costs and commissions as well. Then you have to get it rent ready and if you hire out to a prop mgmt company you're losing 1st mo rent to them for commision. 

So, you went from 30k, down to 20k, let's say 5k for closing and upgrades to get it rent ready. Now you have 5k, it's almost winter so let's say you have 2 months of vacancy (600-700 mo) let's round that and it say it's a 1k.  Now we are down to 4k, but you don't get first mo rent... so another 700 gone.

Now, we're starting off with 3,300.... what happens when you hit a patch of bad luck? How will you pay for repairs, your insurance deductible, maintenance ext? You're only making 300 after basic expenses... you're not going to really build up much capital that way and if you paid at or near retail you have no room to do HELOC or cash out. Even if you did those have fees and are only good for 80% MAX of value.

Now let's pretend your tenant stopped paying rent, put some holes in the wall and destroyed the carpet. You need 5k to get it rent ready and haven't been paid for 2 months. How you going to do that and keep paying the mortage? 

Hi Matt -

Very good points. Forgive me if I didn't explain myself adequately in the posts above, but suffice to say that I would never purchase a house with that purchase price to rent ratio; at least not at the price of 100k. If we're talking 200k, then maybe, because expenses will probably not linearly increase with the purchase price, thus allowing for increased monthly cash flow.

Secondly, even if I did decide to go for the 100k house, I certainly wouldn't sink 20k of my hard-earned dollars into it. I would only do this deal if I was able to purchase the property for ~50k (either via hard or private money), assuming it needed 20k worth of rehab, and appraised at 100k, thus allowing me to cash out and pull the initial investment plus fees back out. The whole time I would retain my 30k for the purpose of cash reserves to be used when and if any number of those things you mentioned were to happen.

So, in short, I realize and understand the importance of cash reserves, and will not leave myself without. That means that I will either be saving up to a larger amount (50k+), and/or using hard/private money to finance deals via BRRRR strategy.

If you're going turnkey route, I'd love to see where you aren't paying retail and getting significantly better than 1%. If you're going the forced appreciation route you aren't getting your 30k back. You'd have closing costs for the loan, soft costs during rehab, and then  seasoning (6-12, 12mo most common) before you can cash out refi. Then once you do cash out you still have closing costs on that. This is also assuming you have no costs over runs during construction. Plus this will get lower each time you do this and I'd guess after you set aside reserves the new capital won't keep up with the costs. 

Originally posted by @Matt K. :
Originally posted by @Lucas Mills:
Originally posted by @Matt Katsaris:

House hack, you're going to have a bad time if you only have 30k saved up. Think about it like this, a 100k house going to get you at or around 1k mo rent. It's going to cost you almost 700 if you hire out a prop mgmt company 600 or so if you don't.  That'll take 20k, but don't forget you'll have closing costs and commissions as well. Then you have to get it rent ready and if you hire out to a prop mgmt company you're losing 1st mo rent to them for commision. 

So, you went from 30k, down to 20k, let's say 5k for closing and upgrades to get it rent ready. Now you have 5k, it's almost winter so let's say you have 2 months of vacancy (600-700 mo) let's round that and it say it's a 1k.  Now we are down to 4k, but you don't get first mo rent... so another 700 gone.

Now, we're starting off with 3,300.... what happens when you hit a patch of bad luck? How will you pay for repairs, your insurance deductible, maintenance ext? You're only making 300 after basic expenses... you're not going to really build up much capital that way and if you paid at or near retail you have no room to do HELOC or cash out. Even if you did those have fees and are only good for 80% MAX of value.

Now let's pretend your tenant stopped paying rent, put some holes in the wall and destroyed the carpet. You need 5k to get it rent ready and haven't been paid for 2 months. How you going to do that and keep paying the mortage? 

Hi Matt -

Very good points. Forgive me if I didn't explain myself adequately in the posts above, but suffice to say that I would never purchase a house with that purchase price to rent ratio; at least not at the price of 100k. If we're talking 200k, then maybe, because expenses will probably not linearly increase with the purchase price, thus allowing for increased monthly cash flow.

Secondly, even if I did decide to go for the 100k house, I certainly wouldn't sink 20k of my hard-earned dollars into it. I would only do this deal if I was able to purchase the property for ~50k (either via hard or private money), assuming it needed 20k worth of rehab, and appraised at 100k, thus allowing me to cash out and pull the initial investment plus fees back out. The whole time I would retain my 30k for the purpose of cash reserves to be used when and if any number of those things you mentioned were to happen.

So, in short, I realize and understand the importance of cash reserves, and will not leave myself without. That means that I will either be saving up to a larger amount (50k+), and/or using hard/private money to finance deals via BRRRR strategy.

If you're going turnkey route, I'd love to see where you aren't paying retail and getting significantly better than 1%. If you're going the forced appreciation route you aren't getting your 30k back. You'd have closing costs for the loan, soft costs during rehab, and then  seasoning (6-12, 12mo most common) before you can cash out refi. Then once you do cash out you still have closing costs on that. This is also assuming you have no costs over runs during construction. Plus this will get lower each time you do this and I'd guess after you set aside reserves the new capital won't keep up with the costs. 

Well that's just it - I won't go turnkey. It doesn't make sense for what I'm wanting to do. I would try to network with wholesalers in the area to get properties below market price such that the numbers make sense for me to be able to purchase the property, rehab it, and have it appraise high enough to be able to pull out my original investment plus fees and holding costs.

Also two totally random properties..

List 203, zillow rent est 1300 that'd be like 1k mo 40k down

https://www.zillow.com/homes/for_sale/Springfield-...

Vs.

List 69, rent 625 mo. that's like 400 mo 15k down

https://www.zillow.com/homes/for_sale/Springfield-...

Find the sweet spot, the 200k houses probably don't work in springfield...  you're basically getting double the rent for nearly 3x the cost.

@Lucas Mills , I believe we should talk.  I've looked into so much of this and have done some of it.  I tried messaging you but I got a 'BP is updating right now' page.  Call me when you can and we'll discuss it.  My number is in my profile.  I  have a friend in Springfield too that tried investing there.  She also says it's just not the market.  

Originally posted by @Matt K. :

Also two totally random properties..

List 203, zillow rent est 1300 that'd be like 1k mo 40k down

https://www.zillow.com/homes/for_sale/Springfield-...

Vs.

List 69, rent 625 mo. that's like 400 mo 15k down

https://www.zillow.com/homes/for_sale/Springfield-...

Find the sweet spot, the 200k houses probably don't work in springfield...  you're basically getting double the rent for nearly 3x the cost.

Ok, this is some good discussion. Thank you for the links - I did a quick and dirty analysis of the second one. Assuming 20% down, 5% amortized over 25 years, which is what I would get because (unless it's my primary residence in the case of a house hack), I want to put properties under my LLC for asset protection.

Here are my variable expenses:

Vacancy: $56, or about enough to cover one month out of the year

Repairs: $42, somewhat arbitary

CapEx: $105, will probably hold me over until the mortgage is paid off in 25 years at which point this can increase, but it's actually a bit less than I'd like given the details discussed in the article that was linked earlier.

Property Management: $70, or 10%, which is standard in this area

Not to mention the fact that this property seems somewhat overpriced, but that could be addressed in my offer price of course (not saying they would accept, but this is just a testament to the price to rent ratio here in Springfield, which, in this case, is about 1%. And 1% doesn't leave much room for cash flow after all expenses are paid, when your income is only $700 a month, which I think is probably a fair estimate if not somewhat generous).

So you tell me; am I really missing the mark here? What gives? We seem to be at odds with each other as it relates to what is a viable investment, and what is not. If this is supposed to be an example of a good investment, I'm not seeing it, unless of course your think that I'm being much too generous with my allotment of capital expenditure. And of course, I couldn't perform BRRRR with this property, but that's besides the point. The same seems to be true of properties at lower price points which need work.

Just for fun, let's assume the following:

Purchase price: 55k

Amortized over: 30 years at 4%

CapEx: $56 (roughly half of what it was before)

Then the deal begins to look viable with a monthly cash flow of about $145. But, this is, in my opinion, an absolute best-case scenario, and, also in my opinion, I have to cut cap ex by about 50% of what it should be in order to make it look somewhat attractive. Even so, this is at the bottom of the cash flow range that I would like to shoot for.

Updated over 3 years ago

*you think

Updated over 3 years ago

*arbitrary

Originally posted by @NaDean Bowles :

@Lucas Mills, I believe we should talk.  I've looked into so much of this and have done some of it.  I tried messaging you but I got a 'BP is updating right now' page.  Call me when you can and we'll discuss it.  My number is in my profile.  I  have a friend in Springfield too that tried investing there.  She also says it's just not the market.  

Sounds good. I tried sending you a message through BP; not sure if it went through or not, though.

@Lucas Mills

If I were you I would just dig in a little deeper and try for BRRRRs locally. 

I looked at Springfield on Zillow for literally 5 minutes and found a few duplexes for $90k to $110k. Each side rents for $525-$575.

If you buy off-market, you could get even better pricing than that.

Here is an example:

See what I found on #Zillow!

https://www.zillow.com/homedetails/2707-W-Nichols-...

Just look at a ton of properties and start narrowing down to target neighborhoods. Your mentor wholesales 2/month...give him your criteria and buy from him. He could probably hook you up with a contractor and might even PM for you at a decent price!

Look, maybe the property above won't work for some reason, but it seems to me you haven't considered all the possibilities locally. There would be nothing wrong with putting a $25k down payment on a $100k duplex that rents for $1100. Is it a home run deal? No way, but it gets you in the game and will cash flow a bit. 

My first property was a 4-plex that rented for about $2200. I bought for $235k. I totally overpaid, but it was the best deal I could find at the time given what I knew then. After this one and others, getting to know the numbers and different areas, and investing long distance as well, I'm seeing deals all over the place within 10 minutes of my house. It's hard to explain, but once you get in the game and start interacting with others in the business, you just learn how to spot opportunities better.

Originally posted by @Lucas Mills :
Originally posted by @Brent Coombs:

@Lucas Mills, I just looked up Springfield MO on Zillow, and there are HEAPS of properties going in the $30-40k range. Are you saying NOTHING nearby will cash flow? What's wrong with EVERY one of those properties?

ie. Is the grass ALWAYS greener elsewhere? Cheers...

Can give me the link to a specific example of a property that seems like it would cash flow well? I'll analyze the property and perhaps you can give me some feedback on it?

There's a certain investor here in Springfield that I meet with on a fairly regular basis, he's been incredibly helpful to me in understanding the Springfield market, getting started, etc. He himself has told me that I will likely have a difficult time getting properties at the price that I need to, considering the amount of cap ex that I want to set aside from the cash flow each month. The difference in cap ex is essentially what makes Springfield viable for him, but not viable for me. But, he has another business on the side and is ok with wholesaling a house to help cover an expense. I just don't want to have to worry about that. This guy wholesales ~2 houses per month, on average. He's got some rental properties as well. I think he's got a pretty good handle on the market here, and I've also seen it myself when analyzing properties.

"The difference in cap ex is essentially what makes Springfield viable for him, but not viable for me"?

Sorry, I don't get that. Cap ex should be about the same, WHEREVER you buy, right? So, how will buying elsewhere help?

(As a percentage of RENT, ongoing cap ex can only go down IF you've bought at a higher price point to begin with, right?)

But if you're saying that for every $100k you've paid in Springfield, you'll only gross $1k per month ("1% Rule"), whereas paying $100k elsewhere might gross $2k per month ("2% Rule"), then yes, that would be one argument. BUT, is it true? 

Who says you can't generate a better percentage in Springfield, than elsewhere? [What am I missing?]

If your friend is wholesaling 2 properties a month, are HIS Buyers then unwise Investors?

I reckon you shouldn't focus so much on deals that would "cash flow well", but, deals whose ARV (after YOUR rehab) WILL get you all your initial outlay back upon Refi, (and will STILL cash flow - a bit), so you can Repeat, Repeat, Repeat......

Originally posted by @Brent Coombs :
Originally posted by @Lucas Mills:
Originally posted by @Brent Coombs:

@Lucas Mills, I just looked up Springfield MO on Zillow, and there are HEAPS of properties going in the $30-40k range. Are you saying NOTHING nearby will cash flow? What's wrong with EVERY one of those properties?

ie. Is the grass ALWAYS greener elsewhere? Cheers...

Can give me the link to a specific example of a property that seems like it would cash flow well? I'll analyze the property and perhaps you can give me some feedback on it?

There's a certain investor here in Springfield that I meet with on a fairly regular basis, he's been incredibly helpful to me in understanding the Springfield market, getting started, etc. He himself has told me that I will likely have a difficult time getting properties at the price that I need to, considering the amount of cap ex that I want to set aside from the cash flow each month. The difference in cap ex is essentially what makes Springfield viable for him, but not viable for me. But, he has another business on the side and is ok with wholesaling a house to help cover an expense. I just don't want to have to worry about that. This guy wholesales ~2 houses per month, on average. He's got some rental properties as well. I think he's got a pretty good handle on the market here, and I've also seen it myself when analyzing properties.

"The difference in cap ex is essentially what makes Springfield viable for him, but not viable for me"?

Sorry, I don't get that. Cap ex should be about the same, WHEREVER you buy, right? So, how will buying elsewhere help?

Generally speaking, I devote more to cap ex than he does, at least 2x as much it seems. If we're using that article for reference (the one that breaks down individual household items, their life expectancy, and their cost) then he does not set aside nearly enough in order to cover these items in the long term.

As far as other investors in Springfield, no, I don't think that they're unwise because they have a different, less-passive business model than myself. They will probably not hold the properties as long as I'm planning to and they are going more for volume, so under-paying on cap ex a bit isn't a big deal to them. To me, it is more of a big deal because I don't want a massive amount of properties -- just enough to meet my goal and to have them be self-sustaining with respect to income being able to cover expenses.

So yes, buying elsewhere is about finding a different purchase price to rent ratio. I'm not even necessarily searching for that magic "2%" number -- 1% is fine given that the numbers are high enough, overall, since the cap ex will stay more or less the same as you said (assuming a relatively similar property type). I don't doubt that I may eventually find something locally that works, but it seems to be difficult. The best wholesale deal I've come across so far (a house for 7k that needed about 30k-40k of work) still wasn't all that great when analyzed (would only rent for about $500-$550) and I was advised to stay away due to the more complex nature of it, at least as my first deal.

If I can hook up with someone in another market that gives me a better purchase price to rent ratio, and make the requisite connections to do deals there, from acquisition, to rehab, to lending, to property management, why not? Seems like it might be a more efficient use of my time, at least while I'm also simultaneously searching for deals locally. I would much rather buy locally, but I'm just having a hard time finding things that work with my criteria. The criteria that differentiates me from other local investors seems to be my increased deference of cash flow to cap ex, as well as the fact that I'm also looking for at least $150 cash flow remaining. Also, the guys I've spoken to don't seem to account for property management from what I've heard. One told me he just does 20% for variable expenses, which is a far cry from what my variable expenses usually come out looking like.

In terms of focusing on deals that I would at least let me refi out as you mentioned in the last paragraph; yes, I've considered this. Even if I found something that would only cash flow 50 bucks, and would allow me to cash out at the refi, it would at least get me in the game. I just see that as an inefficient use of my time, and also somewhat of a dangerous game to play when I have some a small margin of error as it relates to cash flow. What if any number of things happens which quickly eats that $50 up, such as increased APR in the next 3-5 years or etc.? I don't particularly want to put myself in a position up front where I'm more likely to be paying on the property than the other way around..

Originally posted by @Kyle M.:

@Lucas Mills

If I were you I would just dig in a little deeper and try for BRRRRs locally. 

I looked at Springfield on Zillow for literally 5 minutes and found a few duplexes for $90k to $110k. Each side rents for $525-$575.

If you buy off-market, you could get even better pricing than that.

Here is an example:

See what I found on #Zillow!

https://www.zillow.com/homedetails/2707-W-Nichols-...

Just look at a ton of properties and start narrowing down to target neighborhoods. Your mentor wholesales 2/month...give him your criteria and buy from him. He could probably hook you up with a contractor and might even PM for you at a decent price!

Look, maybe the property above won't work for some reason, but it seems to me you haven't considered all the possibilities locally. There would be nothing wrong with putting a $25k down payment on a $100k duplex that rents for $1100. Is it a home run deal? No way, but it gets you in the game and will cash flow a bit. 

My first property was a 4-plex that rented for about $2200. I bought for $235k. I totally overpaid, but it was the best deal I could find at the time given what I knew then. After this one and others, getting to know the numbers and different areas, and investing long distance as well, I'm seeing deals all over the place within 10 minutes of my house. It's hard to explain, but once you get in the game and start interacting with others in the business, you just learn how to spot opportunities better.

Hey Kyle -

For those duplexes in which the purchase price to rent ratio is close to 1%; it seems that there just isn't much meat left on the bone, in terms of cash flow, at the end of the day, when all expenses are paid. If we're talking 1% with a 200k property, it might be a different story. I understand that it's at least "something", but, I just want to use my time and money as efficiently as I possibly can. And since I have full-time job, I can afford to take my time and be picky.

That said, if investing remotely with BRRRR will cause me to lose money, anyways, then I don't want that either. That's why I'm here, to discuss this and formulate an informed opinion on the matter. I feel like, if I know the right people, BRRRR out of city/state can work... Perhaps that's just my inexperience talking. My mentor, or at least, the guy who I view as such, is encouraging me to not limit myself to Springfield because we agree that perhaps it just doesn't work for me here, on average. That doesn't mean I can't do both, though (invest remotely while still looking locally).

I just want to use my time and money efficiently, and wisely. If that means taking less cash flow as a trade for experience, perhaps I should consider that.

Originally posted by @Lucas Mills :
Originally posted by @Matt Katsaris:

Also two totally random properties..

List 203, zillow rent est 1300 that'd be like 1k mo 40k down

https://www.zillow.com/homes/for_sale/Springfield-...

Vs.

List 69, rent 625 mo. that's like 400 mo 15k down

https://www.zillow.com/homes/for_sale/Springfield-...

Find the sweet spot, the 200k houses probably don't work in springfield...  you're basically getting double the rent for nearly 3x the cost.

Ok, this is some good discussion. Thank you for the links - I did a quick and dirty analysis of the second one. Assuming 20% down, 5% amortized over 25 years, which is what I would get because (unless it's my primary residence in the case of a house hack), I want to put properties under my LLC for asset protection.

Here are my variable expenses:

Vacancy: $56, or about enough to cover one month out of the year

Repairs: $42, somewhat arbitary

CapEx: $105, will probably hold me over until the mortgage is paid off in 25 years at which point this can increase, but it's actually a bit less than I'd like given the details discussed in the article that was linked earlier.

Property Management: $70, or 10%, which is standard in this area

Not to mention the fact that this property seems somewhat overpriced, but that could be addressed in my offer price of course (not saying they would accept, but this is just a testament to the price to rent ratio here in Springfield, which, in this case, is about 1%. And 1% doesn't leave much room for cash flow after all expenses are paid, when your income is only $700 a month, which I think is probably a fair estimate if not somewhat generous).

So you tell me; am I really missing the mark here? What gives? We seem to be at odds with each other as it relates to what is a viable investment, and what is not. If this is supposed to be an example of a good investment, I'm not seeing it, unless of course your think that I'm being much too generous with my allotment of capital expenditure. And of course, I couldn't perform BRRRR with this property, but that's besides the point. The same seems to be true of properties at lower price points which need work.

Just for fun, let's assume the following:

Purchase price: 55k

Amortized over: 30 years at 4%

CapEx: $56 (roughly half of what it was before)

Then the deal begins to look viable with a monthly cash flow of about $145. But, this is, in my opinion, an absolute best-case scenario, and, also in my opinion, I have to cut cap ex by about 50% of what it should be in order to make it look somewhat attractive. Even so, this is at the bottom of the cash flow range that I would like to shoot for.

 I picked two random houses off zillow, in a market I don't study, and literally didn't even go past the first page of results ( I have no idea how it was sorted). It was simply to respond to your comment about a 200k house and liner costs/more cashflow. 

If you search on bigger pockets plenty of people struggle to find 2% or really even significantly better than 1% that isn't in a warzone. It can be done sure, but it's rather unlikely that you'll get a desirable (read appreciating) area and it be on MLS. Feel free to point me to zip codes to prove me wrong with consistent results rather than 1 off results.

Maybe I misread, but I thought you wanted to do the BRRR method...
What I'm struggling to understand with your method is how you're going to get these houses and your money back out. I get the idea of what you're trying to do. But.. I think what's going to kill you is the loans. You have closing costs, interest, and then fees for the loans. Then on top of that you have seasoning requirements or you're paying higher costs (significantly) to get around that. 

Originally posted by @Matt K. :
Originally posted by @Lucas Mills:
Originally posted by @Matt Katsaris:

Also two totally random properties..

List 203, zillow rent est 1300 that'd be like 1k mo 40k down

https://www.zillow.com/homes/for_sale/Springfield-...

Vs.

List 69, rent 625 mo. that's like 400 mo 15k down

https://www.zillow.com/homes/for_sale/Springfield-...

Find the sweet spot, the 200k houses probably don't work in springfield...  you're basically getting double the rent for nearly 3x the cost.

Ok, this is some good discussion. Thank you for the links - I did a quick and dirty analysis of the second one. Assuming 20% down, 5% amortized over 25 years, which is what I would get because (unless it's my primary residence in the case of a house hack), I want to put properties under my LLC for asset protection.

Here are my variable expenses:

Vacancy: $56, or about enough to cover one month out of the year

Repairs: $42, somewhat arbitary

CapEx: $105, will probably hold me over until the mortgage is paid off in 25 years at which point this can increase, but it's actually a bit less than I'd like given the details discussed in the article that was linked earlier.

Property Management: $70, or 10%, which is standard in this area

Not to mention the fact that this property seems somewhat overpriced, but that could be addressed in my offer price of course (not saying they would accept, but this is just a testament to the price to rent ratio here in Springfield, which, in this case, is about 1%. And 1% doesn't leave much room for cash flow after all expenses are paid, when your income is only $700 a month, which I think is probably a fair estimate if not somewhat generous).

So you tell me; am I really missing the mark here? What gives? We seem to be at odds with each other as it relates to what is a viable investment, and what is not. If this is supposed to be an example of a good investment, I'm not seeing it, unless of course your think that I'm being much too generous with my allotment of capital expenditure. And of course, I couldn't perform BRRRR with this property, but that's besides the point. The same seems to be true of properties at lower price points which need work.

Just for fun, let's assume the following:

Purchase price: 55k

Amortized over: 30 years at 4%

CapEx: $56 (roughly half of what it was before)

Then the deal begins to look viable with a monthly cash flow of about $145. But, this is, in my opinion, an absolute best-case scenario, and, also in my opinion, I have to cut cap ex by about 50% of what it should be in order to make it look somewhat attractive. Even so, this is at the bottom of the cash flow range that I would like to shoot for.

 I picked two random houses off zillow, in a market I don't study, and literally didn't even go past the first page of results ( I have no idea how it was sorted). It was simply to respond to your comment about a 200k house and liner costs/more cashflow. 

If you search on bigger pockets plenty of people struggle to find 2% or really even significantly better than 1% that isn't in a warzone. It can be done sure, but it's rather unlikely that you'll get a desirable (read appreciating) area and it be on MLS. Feel free to point me to zip codes to prove me wrong with consistent results rather than 1 off results.

Maybe I misread, but I thought you wanted to do the BRRR method...
What I'm struggling to understand with your method is how you're going to get these houses and your money back out. I get the idea of what you're trying to do. But.. I think what's going to kill you is the loans. You have closing costs, interest, and then fees for the loans. Then on top of that you have seasoning requirements or you're paying higher costs (significantly) to get around that. 

I'm still learning a lot, so I may have the wrong idea about some things. I'm open to any and all suggestions, criticism, advice, etc. I just want to make wise decisions.

Yes, I do want to perform BRRRR; but, that particular property doesn't work as BRRRR (the one you linked to for $69,900), so I analyzed it as a regular financed property with 20% down.

You're right - I don't think that doing what I want to do is going to be necessarily easy, but I know guys doing it here in Springfield, granted, their cash flow is a little lower than I'd like, but not by an incredible margin. So it stands to reason (in my mind, anyways) that if I find a market with better price to rent ratio, it will be more viable for me. Plus, if the deal doesn't work, I don't do it. I think that what I want is well within the realm of possibility, especially given a market more conducive to cash flow. The BiggerPockets guys seem to find deals like this all the time out in Colorado.

I think I should focus moreso on multifamily, as much as possible. Multifamily tends to have better cash flow than similarly priced SFR. I almost bought a duplex here in Springfield that would've cash flowed $150 even with my conservative expense estimates, but the flood insurance was too high so I backed out. I think that a triplex or 4-plex that needs some work may show up sooner or later which will definitely work with my criteria. In the meantime, I may try to explore other markets while keeping my ear to the ground for local deals.

You're limited by your capital and focusing on cashflow. Low cashflow isn't bad IF you hardly have any cash into the unit. If you want 15 units at 200 mo to hit 3k mo cash flow that's 15 loans, even at at say 50k ea (which is unlikely outside of a apt complex), that's 750k of loans.

What's your current living situation, you'd likely be better off trying to improve that through house hacking OR if your current house has equity taking advantage of that. Let's say you could make 100 bucks off your current house after it's all said and done... great. Then take your 30k you've saved up and get a duplex (no idea of prices there) live in one side, rent the other. The one you live in fix it up so it's nice to capture the higher rents once you move out... then do the same once the other side is vacant. You could do a FHA loan for 3.5 down...... goes significantly farther than an investment. Plus if you found the right property you're housing costs could literally be 0 or even make money allowing you to save more capital for the next move.

Investing remotely is successfully accomplished by many...i would say the biggest key is building a trusted network in that market. Once you have your team together, ie contractors, real estate agent, wholesalers, re attorney, property manager, etc you will be able to rock and roll. The best way to get quality contacts in an area out of state for example would be to get references from BP members in those areas rather than craigslist or some other blind approach. Good luck!

Hey Lucas.  It's not often we hear about problems finding cash flow in the Midwest.  I'd recommend looking at and analyzing a bunch of deals in your market rather than relying solely on word of mouth from other local investors.  Worst case scenario is that you get proficient at analysis and your market dynamics...best case, you find some deals.    100% of my portfolio is comprised of property types that I hear comments daily on BP that others don't consider them ever to be profitable.  Advice is valuable and first hand experience is invaluable.