BRRRR vs. Rental

3 Replies

Hey everyone, 

Hopefully this makes sense but I'm analyzing deals and have a basic question that seems simple enough but I wanted to get others take on it.  

I've found some turn key rentals that could cash flow in my area but my initial cash out lay would be in the 20K to 25 range and there isn't much I could do the them to increase their values without putting them over market price for the area. Where as if I find a fixer upper property for the BRRRR Strategy my initial cash out lay would be roughly the same but I have the option of refinancing with the increased equity from the rehab. So my question is, what is your opinion, pros, cons of each of these?

If a property can cash flow do I go for it, or do I wait and find something that I can increase the value of so to leverage it for the next one?

Thanks,
Jared

@Jared S.

Like you mentioned, it's very difficult to increase a TK's value. TK providers sell you the properties at a market price or maybe even higher than market. Almost impossible to do BRRRR on TK properties.

If you're using an initial investment of $20-$25K, look for a HML that would fund the acquisition and rehab of a distressed property. If the numbers are right, you can then get your money back by refinancing.

Then repeat the process. 

Thanks for the input @Chris T. I am definitely leaning that way as it will allow future growth at a quicker pace.

BRRRR allows you to add value and repeat through refinancing. You can in theory continue to expand as long as you want to with it, whereas with TK you stop when you run out of available cash (until you save up enough for the next down payment). The trade-off is the convenience- with TK, you don't have to do a thing, whereas if you buy a property that needs work you have to go through the process of rehabbing. Both have their advabtages, you just have to decide what works for your situation and goals.

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