FIRST BRRR Complete! Details + Pictures!

301 Replies

Originally posted by @Adam Stiles :

Great work, @James Gates! About the refi, what income sources did the lender include in your DTI ratio? I know that some (but not all) include rental income from the property. I left my W2 job recently so wondering how hard it will be to refi with only rental income.

Hey Adam,

For the refinance, the lender was able to apply some amount of the rent on the property into my monthly income sources (I believe it was 75% of the rent amount). Luckily for me I have a W2 job so proving my income was not as difficult as I know it can be as a contractor.  

Originally posted by @Nick Clare :

@James Gates - Thanks for sharing. As someone just starting out, it’s great to hear you were able to manage a cross-country deal on your first try (although I’m sure it wasn’t as easy as it sounded). I’m in Chicago, and while not as bad as Cali, a number of things make it a lot more difficult to break into the market while owning your own residence, so I’m looking to go out of state as well. Any tips on finding a location to start scoping out?

 Hey Nick,

My biggest advice that I wish someone had told me when I started was to just pick a market and learn it inside and out. There isn't (in my opinion) that many differences between the top twenty rental markets, so instead of looking for the nooks and crannies between the markets, pick a market and look into the nooks and crannies of that market. Pick one and roll with it. After you get enough properties in that market that you are looking for diversification, pick another market and roll with it. 

Originally posted by @Fidel Arvelo :

Mr. Gates, what an inspirational story / journey.

I happen to live in the Huntsville, AL area at this time and can confirm that the growth is exponential; opportunities abound, specially in the Madison area. I'm not an active investor, but am delving into the real estate realm (baby steps) as my potential source of income post retirement. I've always been a firm believer in real estate, but instead emphasized my military career first and foremost. This approach of course has resulted on missing out on great opportunities. Nonetheless, after 30 years of service, I still see that real estate remains the best option for achieving financial independence, and your story, and that of many others within the BP forums, proves the point. On another note, I just came from a trip in San Antonio, TX and can attest to the exponential real estate growth, whether residential or commercial, opportunities that abound there as well.

Congratulations on your success and wish you the best on all future endeavors.

 Thank you Fidel, and thank you for your service.

I will be in Huntsville in the next two weeks, and I'd love to buy you a drink (beer or coffee) and talk real estate and life. Private message me if you are interested!

Originally posted by @Jimmy Carpenter :

@James Gates

You mind sharing that lender into with me? My partner and I are about to embark on a similar journey and we're already know the bottleneck will quickly be lenders. Thanks!

 Private message me!

Originally posted by @Suly B. :

@James Gates Impressive before and after pictures, thank you for sharing!  I'm glad you decided to pull the trigger, you would've never known what you could accomplish.  With almost everything, the 1st is always the most difficult -it'll get easier. 

 Thank you Suly!

James that is awesome. Congratulations. Sounds like we are on a similar path. We are closing on our 6th BRRR since last April on Monday and it has been a great experience. Would love to connect at some point and share war stories. We are hoping to double or triple the number of projects we take on this upcoming year. I'm actually putting together my first investor presentation as we are going to be bringing in private money for the first time. Would love to see a sample that anyone has of what they use and any recommendations for a 1st timer looking to use private money.

Originally posted by @Arturo Colmenero :

James that is awesome. Congratulations. Sounds like we are on a similar path. We are closing on our 6th BRRR since last April on Monday and it has been a great experience. Would love to connect at some point and share war stories. We are hoping to double or triple the number of projects we take on this upcoming year. I'm actually putting together my first investor presentation as we are going to be bringing in private money for the first time. Would love to see a sample that anyone has of what they use and any recommendations for a 1st timer looking to use private money.

 Hey Arturo,

That is AWESOME, you are inspiring me to keep up the grind. I actually just presented to a private money investor for the first time last weekend, so I would love to swap stories. I'll private message you.

 Hey Nick,

My biggest advice that I wish someone had told me when I started was to just pick a market and learn it inside and out. There isn't (in my opinion) that many differences between the top twenty rental markets, so instead of looking for the nooks and crannies between the markets, pick a market and look into the nooks and crannies of that market. Pick one and roll with it. After you get enough properties in that market that you are looking for diversification, pick another market and roll with it. 

This is really good advice. It's easy to get caught up in fractions of a percentage difference between various cities. We want peace of mind that we're in "the best" market. But the price-to-rent ratio is .01% better in city A vs city B! Build a rockstar team of agents/lenders/contractors/prop managers (the Core 4, as David Greene says) in any of the top 20 markets and they will add vastly more to the return and peace of mind than the particular city. Took me a while to realize we're not buying whole cities, we're putting together one good deal at a time. 

Originally posted by @James Gates :
Originally posted by @Rehaan Khan:
Originally posted by @James Gates:
Originally posted by @Rehaan Khan:

congratulations! So if you wanted to sell this property. Would it sell for $100K meaning around a $20K profit in cash?

 Hey Rehaan,

The property would probably sell for just over 100K, which would be around 20K in GROSS profit, but with transaction costs and large taxes on flips/investment properties, we have no plans to sell. Our 5-7 year plan is to rent, collect cash flow, and reinvest cash flow. In the future when the principal has been paid down a little, inflation has eaten away the debt, appreciation (strong neighborhood) has lifted the value near 130K, we will "sell" the property with a tax-deferred 1031 exchange so limit our tax liability. 

 That sounds like a solid plan! What is a tax-deferred 1031 exchange?

 Hey Rehaan,

I am not a tax attorney, but basically a 1031 exchange refers to a line in the US tax code that allows you to exchange "like kind" assets and defer taxes on the gain. So in real estate, you can "exchange" (sell) a property and you can roll the profits of that property into another property, and defer taxes on the gain. You can, in fact, defer taxes for your entire life by continuing to take advantage of the 1031 exchange. Eventually the plan is to exchange a large number of single family homes for a multifamily apartment complex without paying any taxes (legally).

That's incredible. I always wondered how real estate guys like Robert Kiyosaki and Donald Trump get immense tax incentives and emphasize the importance of avoiding taxes in their books. 

James, amazing results and thank you for sharing the details.  Regarding your market research, can you share some of the sources that helped answer your investment criteria?

Thank you for sharing @James Gates ! I’m in the process of purchasing my first primary residence, so this is quite timely, relatable, and helpful as I look more into real estate investing.  I already have one rental property (basically thanks to an inheritance) but couldn’t quite figure out what to do if I wanted to obtain more rentals (other than the save cash approach), so discovering BP and seeing your strategy neatly laid out is super helpful!

@James Gates hello James! Congrats on your success! My name is cristian Grullon and I'm a newbie investor out of central jersey. My wife and I broke into real estate with our first owner occupied duplex.. thing is we have some capital and the BRRRR method has really caught out attention, I've spent weeks and weeks researching and retaining as much knowledge as possible truly is overwhelming! My biggest question is what's the best way to fund the project?! Did you use hard money? Do we do it all cash with the capital that we have, paying for the home and rehab??? Any feed back would be helpful! Thanks!

@James Gates

Congratulations! I am closing on my first completely out of state investment property by the end of the month (using BP information). I'm currently in Alabama and the property is in Texas (the team there is amazing). Although that property is not a BRRRR, my next goal is a brrrr and doing that here seems like a logical choice.

I will start that journey in 6 months once my Texas property stabilizes with a tenant. Could you pm me the lender and any contractors that you would recommend? My financials are in order, so I'm not worried about approval but a lender that is familiar with the process.

Thank you!

Originally posted by @Eric Hiam :

James, amazing results and thank you for sharing the details.  Regarding your market research, can you share some of the sources that helped answer your investment criteria?

Hey Eric,

One of the things I like to do is just listen to various real estate podcasts and listen to which markets keep coming up over and over. Those are markets that investors are already being successful in, don't try to change the wheel. You can do a lot to a property, but you can't change its location. 

Originally posted by @Cristian Grullon :

@James Gates hello James! Congrats on your success! My name is cristian Grullon and I'm a newbie investor out of central jersey. My wife and I broke into real estate with our first owner occupied duplex.. thing is we have some capital and the BRRRR method has really caught out attention, I've spent weeks and weeks researching and retaining as much knowledge as possible truly is overwhelming! My biggest question is what's the best way to fund the project?! Did you use hard money? Do we do it all cash with the capital that we have, paying for the home and rehab??? Any feed back would be helpful! Thanks!

For funding our first deal, I was forced to use a variety of strategies because I did not have enough liquid capital. First, I got a HELOC on my primary residence. Second, I brought a partner into the deal that had some liquid cash but no real estate knowledge. Third, I used 0% Interest Credit Cards for 18 months (with major sign up bonuses) to fund as much rehab as I could on the cards. You can't pay for everything on the credit cards (usually your contractor is paid in cash), but you can pay for a good amount. Those cards were just paid off with the funds received from the refinance. Rinse and Repeat.

Originally posted by @Barry G. :

@James Gates

Congratulations! I am closing on my first completely out of state investment property by the end of the month (using BP information). I'm currently in Alabama and the property is in Texas (the team there is amazing). Although that property is not a BRRRR, my next goal is a brrrr and doing that here seems like a logical choice.

I will start that journey in 6 months once my Texas property stabilizes with a tenant. Could you pm me the lender and any contractors that you would recommend? My financials are in order, so I'm not worried about approval but a lender that is familiar with the process.

Thank you!

 Private Messaged!

Originally posted by @Aaron Thompson :
@James Gates Hello, James. I'm curious did you use the calculator that BP has available?

 Hey Aaron,

I did use the BiggerPockets BRRRR calculator, it is very useful for wrapping your head around the numbers, and showing your investing partners (or private money lenders) visually and mathematically how the deal will work.

Originally posted by @Paul Hernaez :

@James Gates Thanks for the story it's really inspiring and motivating !

Was it hard to do that strategy while living in another states ? Did you have to control the rehab process and stay there a lot ?

Thank you for your time

Paul

 Hey Paul,

It is not impossible to manage a rehab from afar if your systems are good. If you have built in layers of accountability, a strong team in place, and the proper incentives I think you will find it is easier than the daunting process it looks like. 

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