BRRRR or Traditional financing for first deal

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BRRRR or Traditional financing for first deal

Account Closed
Member since 2020 · 1 post · 2 votes

Hello,

I want to start investing in Real Estate. I am 24 years old, I live in San Francisco, and I have a cash budget of around $25,000 so I am looking out of state. I have spent alot of time researching markets and my current frontrunners are Memphis TN, Jacksonville FL and Huntsville AL. I have been looking at properties and am so far unsatisfied with rent ready traditional financing options. I have also been researching BRRRR strategies using hard money loans which seems much more attractive to me given that I am very willing to do more work to get a better cashflow and returns. I have two big questions at this point.

1) Is it foolish to take on BRRRR as a first deal? Would it make more sense to cut my teeth on a less juicy deal using traditional financing and ramp up from there?

2) Is BRRRR feasible out of state? I would think finding a trustworthy GC out of state would be very difficult. Do people on BP often give GC recommendations?

Thank you for reading this and I hope to get lots of good feedback on these questions and anything else. Please poke holes in my assumptions or thought process!

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Matthew McDermott
Real Estate Broker · Huntsville, AL · Member since 2020 · 22 posts · 25 votes
5y

@Tucker Fife

@Tucker Fife

You're knocking it out of the park with what you're doing at 24. I can tell you're learning the important stuff and wanting to be smart with your deal.

Huntsville is my favorite investment market in the whole country.

I don't think a brrr is too much for a first deal. My first 3 were brrr. What I might say is to take on a light remodel with your first nest egg you're using. I wouldn't want to take on a job needing to move walls, electrical, plumbing etc in a real old house that you never know what all will be involved. You could do a lighter remodel though.

I wouldn't be worried about doing out of state either. Im a local Huntsville Real estate agent, property manager, and run a remodeling company to help our clients have 3 of their core 4 at one stop. Almost all of our clients are out of state. Talking with references of other investors who have used the GC, PM, and Agent is paramount especially those who have done brrrs. That way you feel can sleep at night knowing you're working with someone who is not fly-by-night but has a reputation and commitment.

Send me a message with your questions. Would love go be a resource for you as you grow your portfolio

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  • Steve Archer
    Investor · Ventura CA · Member since 2020 · 14 posts · 16 votes
    5y

    1) A BRRRR out of state does seem like a lot for your first investment.

    2) BRRRR out of state is possible. Once you have boots on the ground (agent, GC, property manager). Biggerpockets members normally don't share their good GC's here. Try local facebook groups and networking on the virtual REIA's going on right now.

    Just my thoughts

    2Reply
  • Dan WeberBusiness Member
    Realtor · Portland, ME · Member since 2015 · 655 posts · 552 votes
    5y

    It's not necessarily risky to take on a BRRRR as your first deal. BUT, if you're doing it out of state, I would look in the mirror and try to figure out how risk adverse you are and if you have the mental and emotional fortitude to go through an out of state BRRRR as your first deal.

    If you connect with a good, professional agent and pm company from BP, they should be able to refer you to a good GC in that area. 

    2Reply
  • Matthew McDermott
    Real Estate Broker · Huntsville, AL · Member since 2020 · 22 posts · 25 votes
    5y

    @Tucker Fife

    @Tucker Fife

    You're knocking it out of the park with what you're doing at 24. I can tell you're learning the important stuff and wanting to be smart with your deal.

    Huntsville is my favorite investment market in the whole country.

    I don't think a brrr is too much for a first deal. My first 3 were brrr. What I might say is to take on a light remodel with your first nest egg you're using. I wouldn't want to take on a job needing to move walls, electrical, plumbing etc in a real old house that you never know what all will be involved. You could do a lighter remodel though.

    I wouldn't be worried about doing out of state either. Im a local Huntsville Real estate agent, property manager, and run a remodeling company to help our clients have 3 of their core 4 at one stop. Almost all of our clients are out of state. Talking with references of other investors who have used the GC, PM, and Agent is paramount especially those who have done brrrs. That way you feel can sleep at night knowing you're working with someone who is not fly-by-night but has a reputation and commitment.

    Send me a message with your questions. Would love go be a resource for you as you grow your portfolio

    3Reply
  • Stephen Akindona
    Investor · Memphis, TN · Member since 2013 · 741 posts · 845 votes
    5y

    Hey @Account Closed! Good for you pursuing real estate at your age! Man, brrrr is the way to go if you can. No need to worry about whether you can pull it off. It can be done successfully out of state! We have tons of clients doing this every month! What you need to focus on is your team. You need to build a team in the market that you choose that you can trust. They have to operate with full transparency and have the highest levels of integrity. They need to have current clients that have worked with them more than once! 

    Ask for references and then actually call them! Drop their names here in BP and see if people have had any experiences with them. If you focus on putting the right team together you will excel! the perfect deal in the perfect market can come crashing down with the wrong team!

    1Reply
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