How Much Savings Should You Have Before Starting To BRRRR

16 Replies

Hey BPers!! I'm currently running a new wholesaling business that is doing just fine. I'm trying to come up with a strategy plan to real estate investing. I was just wondering on how much money should I save before starting to BRRRR properties. Should I jump in as quickly as possible or should I wait. Can anyone give me there thoughts on the pros and cons of waiting until I have more savings to then reinvest in to some BRRRR properties. In my mind I would say that it would be best to wait until I have more capital and then begin the BRRRR process, but I don't have any solid evidence other then gut instinct. Thoughts and suggestion please my friends.


Trevor, I would suggest finding an experience partner who has done BRRRR before. You can leverage the partner's experience to minimize your risk as a beginner.

As far as savings, You typically would enough money for a down payment. Typically 20% of the acquisition price. Depending on values in your area, that could be from $20k to $50k. 

side note: i would consider partnering with you. But I am up in Chicago, IL. 

It really depends on your market, but I would say something like ~$50,000 would be preferable although you could probably get away with less, especially if you have access to some credit lines, people willing to lend you a little money, etc.

Originally posted by @Sathish Sekar :

Trevor, I would suggest finding an experience partner who has done BRRRR before. You can leverage the partner's experience to minimize your risk as a beginner.

As far as savings, You typically would enough money for a down payment. Typically 20% of the acquisition price. Depending on values in your area, that could be from $20k to $50k. 

side note: i would consider partnering with you. But I am up in Chicago, IL. 

 As a wholesaler I would probably just use one of my wholesale deals to take on myself with a partner or preferably with private money. I am just trying to figure out any substantial pros and cons to waiting on lets say starting with 20k in reserves vs starting with lets say much more like 100+k. I could see the advantage of starting early as it would get the ball rolling and potentially getting to the refinance point sooner and thus getting the snowball effect going. Waiting for more money could also allow for security. But I'm kind of stuck there for the breakdown of the two.

Originally posted by @Andrew Syrios :

It really depends on your market, but I would say something like ~$50,000 would be preferable although you could probably get away with less, especially if you have access to some credit lines, people willing to lend you a little money, etc.

 That definitely seems like a sensible number! I operate in a market of $70k-$200k housing market range. I definitely think I will be using private money for this and maybe some personal lines of credit. 

@Trevor Schuler Great question! I've been curious about the same question. I think the more savings the better, BUT if you find a great deal then you move on it. I'm not sure there is a magic number unfortunately. I'm no expert by any means, but the experience of closing the first property more than likely outweighs the money saved. Obviously, you would want to have enough for closing costs, rehab, possible vacancy costs, etc. but if you have a private lender then you have some flexibility for additional costs. There is value in experience! Just my thoughts. Hope all goes well with your investing! 

Originally posted by @Kris L. :

How do you BRRRR successfully if you take out a first mortgage (80/20)?

A BRRRR would be possible after rehab. After repairs are done, the property would be worth more. So a refinance could pay back the purchase mortgage and hopefully the down payment.

@Kris L. In my case as I mentioned earlier it would most likely be an off market deal. For you it could be through another wholesaler or maybe a direct mail campaign. Something that may not qualify for a loan at first and would need private or hard money to purchase and fix up, season then re-finance. Buy, rehab, rent, refi then repeat

@Austin Fowler experience is king I think too! Although technically you would be starting another business depending on if you do the rehab and management. I would definitely like to here from a few seasoned investors on what they think the right approach is? I'm sure that most investors started out slow and things snowballed.

Sathish, I will admit I know very little about the Chicago market, but is it even possible to find a lender who will loan on a property which is in bad enough shape where the rehab will recoup enough?  That would be extremely difficult to find in my area.

@Trevor Schuler

You should already be considered a real estate professional for your tax returns which means you can be writing off your income with passive losses from cost seg studies. You can do those for SFH to small MF for only $400 each. So I'm not sure what your tax situation is but getting going with rental properties (including BRRRR) should really help reduced your taxes. If you've got access to deals and private or hard money then maybe just start holding. For smaller BRRRR i have found its easier to go in all cash and then just do take out financing. Depends on the condition of the property when you buy, of course. So whatever you got in the bank maybe just get started if you're ready. I didn't have that much cash in the bank but I figured it out and made it work on my first BRRRR deal.

@Trevor Schuler

I have one rental currently, but I am close to acquiring first BRRRR using cash. Targeting 50k purchase price and about 70k all in with renovations and closing. I think if you can come up with the cash, obviously that's advantageous compared to paying hard money rates etc. Mind you, it has taken me ten years of learning, planning, set backs, and saving to get to this point.

The amount of cash you need depends on the deal that you find. If you buy it traditionally (down payment with bank, or buy it cash and re-fi), you will need funds to close, perhaps funds to float payments to contractors (with or without a construction loan), and you'll need cash reserves for at least 3 months (6 is best) to cover all holding costs associated with the property.

If you want to go the creative route, that opens up a whole realm of options. If you have an equity partner, you don't really need any money...

Originally posted by @Greg K. :

@Trevor Schuler

I have one rental currently, but I am close to acquiring first BRRRR using cash. Targeting 50k purchase price and about 70k all in with renovations and closing. I think if you can come up with the cash, obviously that's advantageous compared to paying hard money rates etc. Mind you, it has taken me ten years of learning, planning, set backs, and saving to get to this point.

Rightfully so! I have studied for quite a while and put myself through a lot of audible and podcast learning. It does seem to happen quickly once you get the ball rolling or start to get your feet wet. I would have never imagined I would be in this position now but it makes sense when you look back on the actions you take to get going. I'm not that fond of the idea of using hard money, but may have to utilize it or partner up.