BRRRR my first house that I own?

7 Replies

Hey everyone, I am going to be buying a single family home for my wife and I in the next few months. I have been reading and listening to a lot of stuff on BRRRR investing and really want to get into it. My question is, can I do it on a home that I am living in myself? I would like to buy a home, fix it up for the next year or two while living in it. (also so that we get occupancy there for the loan) then try to refinance and start renting it out after hopefully buying a 2nd home for us to live in. Are there any flaws to this strategy? I want to make sure this is a good decision before actually getting to that stage. Thanks!

I don't see any reason you couldn't do this.  I know of several people that do this and buy another house every 2 years.

A few things you will want to check is rental rates in your area and also get some solid comps for the house you plan on fixing up.  

Run those numbers several times and make sure they work for you.

Things can sometimes get a little hectic living in the house you are fixing, but it can be done.  Be sure you have money to cover any extra expenses that come up.  Get some good estimates on repair costs.  I like to go 10 percent above that to cover things unknown.  Once you start tearing into floors and walls there is no way to know what you find.  A home inspector will find some issues, but not everything.  I had all kinds of things break my first year of ownership.

People often overlook things like water heaters, water softeners, furnace, and air conditioning.  They can be costly to replace.  I replace any water heater or softener 10 years or older.

If you get enough equity built you could possibly do a HELOC and use that as a downpayment.

While it's not following BRRRR precisely, I think it's a great plan! You'll get much better interest rates, write off the mortgage, and improve as you go!

Be sure not to over-improve. As you renovate, remember you’ll be renting it in 2 years, so don’t go for the high-end appliances, finishes, etc. it’s hard - since it’s your house and you’ll want to pick what you like. But stay the course and you’ll do fine.

Also, you will probably not want to refi later. The interest rates will likely be higher then, and you'll be in gray area about whether you're refinancing it as your primary home. I'd instead consider a HELOC before you make the decision to move/rent. You'll have some extra cash available and still have a good interest rate on your primary mortgage.

Good luck!

Hello Derek,

Let's see,

Buy, "Live-in Rehab", Rent, Refinance, Repeat,  maybe, "BLIRRRR..., I don't know, I think is a cool idea!

Basically, the math tells you if flaws exist or not,

One thing I would do is to find out the average rent, tenants are paying (use rentometer.com, Zillow rent estimate or ask around) for houses that are similar to the "post-rehab" house (same number of rooms, 1 or 2 miles distance, without crossing high-ways or main roads). 

I would get that information before buying it (cash or bank financed) because, it will allow you to see if the rent can cover your running expenses & financing (taxes, HOA, CDDs (Community Development District), repair fund(toilet broke, angry teen broke switch), Capital Expenditure (the roof was taken by "Humberto"), and, if it applies, mortgage payment).

The leftover money is your Cashflow.

Best of luck with your project !

If you focus your numbers and remember to analyze them as a rental, not your primary, this strategy can work very well. I'm working on my second house under this type of strategy. It's a great way to build equity in the home before you refinance.

@Derek Wilcox

Hello.Derek

I used a Va loan to buy current SFh

At the age of 63.

Its a small 3/1 2 1/2 garage

Yes that is my plan as well

Rehab this house ( as per Va rules )

You keep this a your primary residence for atleast one year.

During this year of rehab around 10/15k .

Then rent it out.