Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
Can you talk about in what condition you are buying properties, and how are you buying them?
I really want to go down this road for my next investment but it seems a lot of the properties I see that would be "BRRRR-able" are cash purchases.
Are you buying properties so distressed they are cash purchases? In order to get your money out, assuming you have your financing fixed, it seems there needs to be a big upside. I'd love to say I have enough cash to buy more houses in cash, but I don't.
Would love thoughts/feedback on what you look for if BRRRR is your focus.
Rental Property Investor · Drums, PA · Member since 2017 · 345 posts · 365 votes
7y
@Courtney M. I’ve got 3 young daughters and I try to involve them as much as I can in our real estate business. Here’s why I’m telling you this. When I go to view properties I often bring the kids. They’ve gotten to the point that when we walk into a perspective property and It’s disgusting and stinks, I asl them what they think. Their response, “Smells like money Dad!!”
So, I’ve found success with making cash offers on homes that primarily require cosmetic fixes. I’m buying these anywhere from 20-50% below market value. We renovate, rent and refi our cash back out usually within 6 weeks.
Find the next property, and do it all over again. We started about 1.5 years ago and we’re (my wife and I) currently working on #11.
Let me know if you have any questions regarding the specifics of BRRRing
Best of luck!!
Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
7y
@Michael Kiley
Are you seeing an increase in bank owned / REO properties in Cleveland ?
Are these properties listed on the MLS or off market ?
I believe I read something that the bank has to list on MLS but not sure if that is accurate or has changed .
Real Estate Agent · Cleveland, OH · Member since 2017 · 184 posts · 253 votes
7y
@Courtney M.
I have a friend who I started buying houses with 25 years ago. He had money and I had time. We put the house in his name but the success or failure of the project was all on me. I'd find the house that he would then purchase and fund all the improvements. 3 months later when "his" house sold, I would invoice him for the work I did. The invoice amount would equal the total profit minus the cost of his money.
Pros: He had security. I secured a "line of credit" that was relatively cheap (7% no fees). I didn't need any money to get started.
Cons: The house was in his name so if something happened to him (law suit, death) I could be on the hook.
We had a construction agreement drawn up by my attorney but obviously, trust was still the main ingredient.
This process could work for a BRRRR as well if you didn't plan to flip.
Rental Property Investor · Springdale, AR · Member since 2017 · 60 posts · 48 votes
7y
We are using bank financing via construction loans to purchase and renovate our BRRRR homes. We pull our down payment and sometimes some of the renovation budget when we refi.
Newport News, VA · Member since 2016 · 28 posts · 12 votes
7y
Hello All, Newbie here and 1st unit. On that note, I love reading all the posts here..great stories. My small ideas...PHOTOS...get so many pictures of prospective properties. I got burned due to deployment and ended up with 30k in rehab due to a very dishonest agent. DO NOT...believe "friends"...my inspector told me property was not worth rehab but my buddy...aka...agent and also contractor swore would make tons of money. 60k later, property did not even refi to get any cash out. Now 18 months later it's rented but barely enough to cover rehab loan and mortgage. I learned many lessons and am finally breaking even, but life is brutal and things are never as nice as it seems. Expect hiccups during rehab and always believe your inspector over a contractor...ALWAYS. Contractor is just trying to get your money, an inspector has a license on the line. Finally, get some sort of warranty for work performed. I had multiple issues and my contractor said "sue me"...not worth the time or lost W-2 wages to pursue. Best wishes in this great field, I am working on #2 now...never give up. J
Rental Property Investor · Drums, PA · Member since 2017 · 345 posts · 365 votes
7y
@Joseph M. Yes Joe, I try to keep rehabs atbor under 10k. I found this bank by attending a local real estate investors meeting and asking around.
Unfortunately they only lend locally here in PA.
I'm looking for properties that need kitchen and bathrooms remodeled. I feel like those are the two areas that add the most value and then I throw in offers and 70-75% of the ARV. I'm using hard money for my BRRRR properties.
Find lenders before hand that will refinance the properties without a seasoning period. Good luck!
Rental Property Investor · Drums, PA · Member since 2017 · 345 posts · 365 votes
7y
@Gerald McCullough I don’t think my timeline is anything too unique. I know a few other investors doing the same.
After I get the house and begin the Reno I apply for the refi.
I provide my rehab costs and we get an appraisal. During that time we get the property rented for the next month (lease signed and provided to bank). Within a few weeks we get the cash back and start all over.
Rental Property Investor · Drums, PA · Member since 2017 · 345 posts · 365 votes
7y
@Cam Jimmy it’s a mix. Most electrical and plumbing I sub out to guys I have been using from the beginning. I have some labors inhigher to paint, then I do most of the carpentry and finish work.
Real Estate Broker · Jacksonville, FL · Member since 2014 · 78 posts · 54 votes
7y
@Michael Kiley you made a great point about the money vs time comparison. For those who think they can do it with zero money (only to find out the true upfront costs with a lot of hard money) and other fee's, that are often never discussed, when people talk about borrowing 'quick cash' from HML's and Private Lenders. People often overlook the possibility of JV-ing a deal. Yes it comes down to trust but if one person has the resource of time and the other has the resource of finances, those are often ways for newbies to get into the game and build some wealth with little or truly no money out of pocket. I feel many people steer away from this concept for the wrong reasons. "my name isn't on the deed" or "I'm not getting all the profit" those are often the ones that are in it for the wrong reasons all together anyway though.
To confirm @Michael Kistner's statement, there are plenty of HML's that have very short, if any, seasoning periods.
If you have the cash to purchase a property and are feeling like more of a late fall BRR temp in New England and not the mid winter BRRRR (my seasonal jokes are horrible, I'm sorry) here's one I've considered. You could potentially drop up to two of the R's (renovate & rent).
This would work when buying a rental property that doesn't need a lot of work, at a discount. While closing the deal with your own cash, get the process started with a HML who has no seasoning period. Close the deal today, refinance the deal tomorrow into a shorter ARM. Refinance once more into a conventional mortgage once your seasoning period with your normal lender passes.
This is certainly not a situation I see happening very often but on the right deal I could see this as a possibility. Has anyone done anything similar before in as quick of a turn (say within 1 week of purchasing)?
I see a local lender lets you finance 80%, a locals advantage. How are you able to cash out refi so soon? Are you using the delayed financing method they mentioned in episode 301 that Mindy also mentioned?
Rental Property Investor · Drums, PA · Member since 2017 · 345 posts · 365 votes
7y
@Ernesto Hernandez Many banks don’t require you to “season” the loan. So we buy in cash and refinwith cash, then just refi it back out. If I waited u til each BRRRR was completed and then started the refi process, I’d only be able to do 3 or 4 deals per year...
My example may not have been perfect, but I believe my argument is sound. Hard money lenders will sometimes can cost you more than other types of loans. If the added cost of your payments to your loan changes the numbers too much in your investment into it, that you do not follow the 70% rule anymore, maybe seek another deal that you can afford.
However there are many good deals you can make with the additional costs of HML just make sure that the the numbers add up in your favor.
Yes, you are absolutely right HML will be more expensive than other funding.
Hmmm. I am not a HML but I worked with a good one. And yeah, that's not the ideal funding source long-term.
Remember, as part of the fee, you get their fair, objective opinion on your deal, ARV, scope of work, cost estimates, and so on -- that's worth a lot if you are open to listening. I wasn't, on my deal and that is all on me, but I damn sure will be next time.
Gotta keep in mind that these guys aren't bankers, they also started out as investors, flipping and BRRRRing houses, and they know what they are talking about when they go walk your property. Would you pay a few grand for a mentor? Many new investors pay way more than that -- these guys build it into your fee.
The most expensive funding is (a) 50/50 split equity partnership money and (b) opportunity cost, thanks to the funding you couldn't get.
Bound Brook, NJ · Member since 2018 · 171 posts · 37 votes
7y
If you are using a HML, you should expect to pay those set interest and payments for at least 6 months (for your holding cost during seasoning period). How do you make payments to HML when you don't have a tenant yet and still in rehab?
Bound Brook, NJ · Member since 2018 · 171 posts · 37 votes
7y
so there really is no true "no money down" BRRRR. Besides inspection and appraisal, you got to have money available to make payments to HML during rehabs.
Real Estate Agent · Cleveland, OH · Member since 2017 · 184 posts · 253 votes
7y
@Mitchell Litam, any area can be advantageous to BRRRR. It just comes down to buying at the right price. The Biggerpockets BRRRR calculator can help with that. With that said, I BRRRR in C or B neighborhoods because I rent single family homes and get good tenants that never want to leave. There are many good zip codes to choose from, but I like 44111, 44135, 44109.