BRRR- Appreciation or Cash flow more important?

[Natalie Kolodij]

Hello Everyone, 

After listening to Brandon Turner's podcast on BRRR the other day I'm wondering what the ideal market is for this strategy?

I was looking at markets with excellent cash flow- however I doubt they will offer much appreciation. 

Will BRRR still work well in this markets, or is it necessary to have the appreciation element for this strategy to work well to build a portfolio?

[David Faulkner]

Originally posted by @Natalie Kolodij:

@Justin Tahilramani based on Brandon's webcast it sounded like a key to his strategy involved not holding the properties forver but rather selling 1-2 every year (and repeating) allowing you to bring in large influx' of cash after 5-10 years of holding 

Is is what made me wonder if the appreciation was necessary 

Correct, in a market with little to no appreciation you will want to cycle through your inventory after 5-10 years of holding before CapEx eats into your returns. If you do it in a market with appreciation, you hold and handle the CapEx when it comes, which you are more than compensated for with market appreciation. In this regard, investing in a market with long term appreciation (not just one or two years but averaged over decades) is a lot more passive of an investment. The problems are 1)markets where appreciation above inflation is sustained over decades is exceedingly rare (but they do exist), 2)in these type of markets your initial cash flow will be much lower (but not in the long run with rent increases) as compared to a market with high initial cash flow and no appreciation (negative appreciation after inflation), and 3)markets with long term appreciation by definition are not cheap so you will need some capital to get started. In fact, in such an appreciation market, you can do one of the Rs (cash out refinance) again and again on the same property without needing to constantly buy and rehab if you don't want to (though you still can if you want).