FIRST BRRR Complete! Details + Pictures!

301 Replies

Originally posted by @Mirzet Mehovic :

Congrats on your success! This may sound stupid but I'm new. How much profit do you get per month from this property if you don't mind sharing? How much from the other properties? I'm wondering how many you would need for example to have $5,000 a month. 

 Hey Mirzet! 

Our goal is $150 a door cash flow year 1. This is after accounting for mortgage, taxes, insurance, property management, vacancy, and maintenance/capex. With the markets we are investing we feel confident that this cash flow will increase yearly with rising rents and population, as well as the property appreciating with the desirability of the town. If your goal was $5000 a month you would need 33 units. I know that seems like a lot, but we already have 6 and we just started last year. It is very possible to get 30 units inside of 5 years. Also, you may find that you do not need as much cash flow as you think, and remember your cash flow number is not accounting for equity build up, inflation, or appreciation. So every 5-7 years or so when you exchange the properties via a 1031 tax-deferred exchange you are going to sharply increase your net worth and your cash flow position.

-James

Originally posted by @Eric Kuo :

@James Gates

Thanks so much for sharing. I am in the Seattle area and just started learning about BRRRR, but the stories around Seattle is just discouraging, and yours is the complete opposite and really helps to motivate me! thanks!

I am in the process of getting HELOC myself. One thing I have not seen people talk about is how you pay the interest back after you start taking out funds from your HELOC before your refinance ? Do you take out more than you need to cover the monthly interest payment? Or do you have other fund to cover it?

Thanks again!

 Hey Eric,

So my HELOC payments are interest-only with a minimum payment of $100 a month. during the initial 6 months before you refinance you will have a tenant in the property within 2-3 months that will be paying full market rent, but you will not have a mortgage on the property. Your cash flow per month during this phase will be more than enough to cover your interest-only payments as well as build a reserve for the property. I generally do not plan on taking any "profit distributions" for a rental property until the property has stabilized after the refinance. When you refinance you can pay off the HELOC in full, and then Rinse + Repeat.

-James

@James Gates

Congrats on your first BRRRR!! I hope your other deals have been working out for you too.

I'm curious about your partnership. Did you both split the down payment? Whose name is on the Title? Whose name is on the loan?

I'm considering doing something very similar and I'm not sure how to structure that part. Would appreciate any feedback!

Congrats again! Happy investing!

Originally posted by @Collin Bo Nixon :

I am brand new! Haven't done a single deal. However i have studied and read about the BRRRR method and I know you want to buy it with cash. But would it work at all if you took a loan to buy the house?

Hey Collin! Welcome to BiggerPockets. The BRRRR method words best for purchasing a property in cash for 2 reasons.

1) Usually the home needs a significant amount of work, so a traditional lending institution will not provide a loan on the property. The property can only be purchased cash.

2) Closing Costs are expensive. In my market, to close on a hone in cash is about 1K in closing costs. When you refinance the property, that's another 3K in closing costs. 4K Total.

If you wanted to take a loan on the property when you bought it, and then refinance the property after the rehab, you would have to pay full closing costs twice, which can severely cut into your profit. 

Originally posted by @Otis Sanders :

@Melissa Nash hi do you mind sending me the groups information that you work with in Birmingham? I bought  a property over there and need to find someone that can potentially do a rehab and permanent loan 

 Yes!! Please message me and I’ll send. 

@James Gates I just ran into this post and it couldn't have been more perfect timing. Thanks for sharing, from the story all the way to answering everyone's questions. I'm in such a similar position right now from this story that it's inspired me to keep going! I hope to be able to have the same success soon.

@James Gates assuming that you maxed out your HELOC. Did your credit take a big hit due to utilization? I'm planning on doing the same and my concern is that if I use my HELOC, take a big hit on my credit, I'll have difficulty with the cash-out refi.

Originally posted by @Doug Bielecki :

@James Gates did you pay cash or finance at the beginning? Also, how is your partner contributing to things? Silent, business mgmt, evaluations, capital?

We paid cash at the beginning, part of my HELOC and part of my partner's cash.

Originally posted by @Ben Chan :

@James Gates assuming that you maxed out your HELOC. Did your credit take a big hit due to utilization? I'm planning on doing the same and my concern is that if I use my HELOC, take a big hit on my credit, I'll have difficulty with the cash-out refi.

Credit score did not take a big hit, and anything over 740+ gets the same interest rate from the bank. Since the HELOC only requires a payment of $100 a month, DTI wasn't really affected.

Congrats James on your first deal. Are you looking to do multi unit property with BRRRR? Thanks for sharing details of your deals. You also stated the power of networking and relationships with other investors

Originally posted by @Chris Battaglia :

Congratulations! How much did the refinance cost you and how much did your mortgage payment go up by? I feel like this part of the BRRRR strategy is not often talked about and curious to hear how it impacted your monthly cash flow.

I agree. I feel like this should be added to the BRRRR calculator.

 

Originally posted by @Adekunle Ilori :

Congrats James on your first deal. Are you looking to do multi unit property with BRRRR? Thanks for sharing details of your deals. You also stated the power of networking and relationships with other investors

The goal right now is to build a portfolio of Single family in an area I see immense potential in, and then 5-7 years (appreciation, principal paydown) down the line 1013 exchange them into a larger multi-family property.

I can not stress enough the power of networking and partnering. It has allowed exponential growth.

 

James ,your post so inspiring!I m also in CA and looking for buy out of state to use BRRR strategy.


I have two question about your journey 

1.how to do you find the partner? is the partner in the local where your purchases are?

when you mean partner ,is the partnership like you both pay 50%/50% on the initial fund to buy a property and share the profit afterwards?I m still confusing about when people talk about partner, I need a partner too, but now sure the partner really means and how to function.

2. how do you find the wholesaler ?

all the properties I can search are on MLS or turnkey companies.

where do you find wholesaler to buy off markets deal?
thank you!;)



 

Originally posted by @Liu Gaby:

James ,your post so inspiring!I m also in CA and looking for buy out of state to use BRRR strategy.

I have two question about your journey 

1.how to do you find the partner? is the partner in the local where your purchases are?

when you mean partner ,is the partnership like you both pay 50%/50% on the initial fund to buy a property and share the profit afterwards?I m still confusing about when people talk about partner, I need a partner too, but now sure the partner really means and how to function.

2. how do you find the wholesaler ?

all the properties I can search are on MLS or turnkey companies.

where do you find wholesaler to buy off markets deal?
thank you!;)

Hey Liu,

My first partner was a good friend of mine growing up, and we reconnected when discussing and learning about real estate investing. 

Partnerships can be done a lot of ways, for my main business partner we split everything 50/50 and contribute 50/50, but I have also worked with partners where they put up the $ in exchange for some % of equity, or some % return. It is all in how you manage the deal and what the goals of the partnership are. 

2) MLS deals are harder to find these days, but by connecting with individuals on BiggerPockets and networking you can find wholesalers and agents that are actively looking for investment properties for out of state clients.

 

 

This post has been removed.

Originally posted by @James Gates :
Originally posted by @Liu Gaby:

James ,your post so inspiring!I m also in CA and looking for buy out of state to use BRRR strategy.

I have two question about your journey 

1.how to do you find the partner? is the partner in the local where your purchases are?

when you mean partner ,is the partnership like you both pay 50%/50% on the initial fund to buy a property and share the profit afterwards?I m still confusing about when people talk about partner, I need a partner too, but now sure the partner really means and how to function.

2. how do you find the wholesaler ?

all the properties I can search are on MLS or turnkey companies.

where do you find wholesaler to buy off markets deal?
thank you!;)

Hey Liu,

My first partner was a good friend of mine growing up, and we reconnected when discussing and learning about real estate investing. 

Partnerships can be done a lot of ways, for my main business partner we split everything 50/50 and contribute 50/50, but I have also worked with partners where they put up the $ in exchange for some % of equity, or some % return. It is all in how you manage the deal and what the goals of the partnership are. 

2) MLS deals are harder to find these days, but by connecting with individuals on BiggerPockets and networking you can find wholesalers and agents that are actively looking for investment properties for out of state clients.


@James Gates:

Thanks for your reply,For partnership do you think one partner is good enough or we should have more and more partners to contribute more funds and acquire more properties ? when we looking for partner do we look the other person has to be experienced investor or who can be just as newbie as I am , i was wondering if two people partner up but both newbies How does that work? but for those experienced investors do they even want to partner up with newbies? confusing how to make it work.

thanks !!!!

 

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