Should i do a Brrrr or 20% down?

Question

Hey Group,

So i'am a bit confused and i was hoping for some guidance. Currently i own a single family home which i bought from a turn key provider. Personally i felt that it was a too hands off, and that i would like to get a more involved in my next property.

My game plan is to scale and acquire property to hold for a long time. Currently i'am looking for homes that don't need major renovations (5000-10000) worth of work. I'am confused if i should do the BRRRR strategy or put 20% down.

I understand if i do the Brrrr i could pull majority of my money out in 6 months, but if i did go the 20% down route wouldn't i be able to pull the 20% equity out at some point if i needed it?

Also instead of locking up a bunch of money doing a brrrr wouldn't i be able to buy multiple homes in that time period by putting 20% down? It seems like that would be a more effective way to scale quicker.

Like i said i'am just confused on which method would be more effective, and the pros/cons of each. Any advice or guidance is much appreciated.

Thank you!

Antonio Verderosa · Answer

@Daniel Weber, @Mike D'Arrigo. Thank you for clearing that up for me. What are your guys thoughts on doing a minor rehab to just clean the place up and get it rented versus a major renovation?

Mike D'Arrigo · Answer

@Daniel Weber is dead on. You need to force at least 30% equity in order to pull all your money out in a BRRRR. You'll never force that much equity with a minor rehab of $5000-$10,000. You're going to have to make some significant improvements.

Dan Weber · Answer

One of the R’s in BRRRRR is Rehab. The idea in a BRRRR is to force sizeable appreciation through that rehab portion of that system. Spending $5k-$10k in renovations likely won’t result in the type of equity gain you would be looking for.

If you are looking to scale quickly and not spend much on rehabs, I think that putting 20% down on multiple properties that meet your investing criteria and return totals would probably be a better route. Start with your end goal and work backwards to make a plan.