BRRR strategy expectations

5 Replies

You make your money when you buy, etc.

If I were to buy a 3 br 2 bth single family in a desirable neighborhood, no repairs needed, traditional financing with a 30yr fixed rate mortgage, would i be making a bad investment if I purchased the property through a realtor?

Listening to Brandon's Podcast here makes me think that i need to buy a property that is falling into a sinkhole and covered in black mold and then get my "Justice League" of contractors to fix it up before I can make a profit off of it (using the BRRR strategy).

I desperately want to jump off the high dive into real estate investing but Im deterred because I dont want to buy a property with more cigarette smoke damage than a 1950s casino. Am i being unrealistic? Can i buy something through a realtor and have managed by a professional property manager (assume 10% commission) to make it worth my while?

For discussion lets assume typical Midwest suburbia.

Nobody is going to be able to tell you if you're making a "bad investment" without knowing the specifics - sale price, nearby comps, expected rent, etc. Thinking in abstractions doesn't help much.

Can you buy turnkey and still make money? Yes. 

The general rule is that the more passive the investment, the lower the return. If you're happy to park some money for 30 years in an A-class property with professional management and collect a 6% return, then you can do basically nothing. If you want to recover all your up-front cash or want a substantially higher return, you're going to have to work for it, probably involving some rehab. In any kind of transaction, you have to find a way to add value if you want to get paid.

People don't typically hand you a house in a desirable neighborhood with zero repairs needed for less than the full market value. If you pay full market value, you don't make as much money.

@Alan E. , the answer to your questions is in your first sentence.

The converse is also true: "If you don't make your money when you buy, you've lost money"! 

ie. It's a long road to make up that loss. You have to start your savings regimen all over again (because you won't be able to refinance in the foreseeable future to get your deposit back)! 

Get where I'm going with those thoughts? Good luck with those delightful turnkeys out there...

A lot of what you're asking is answered with, "it depends on what your goals are". In general, buying using the method you are talking, will yield the least amount of cash flow per month and the lowest returns (other than cash). But, on the other hand, it is a lower risk, for the most part. The property is in good shape, and most of the expenses are somewhat known. So, if you are ok with scaling more slowly, or if you have a lot of cash on hand, it's a perfectly good way to invest. If you are looking to purchase multiple properties per year, you may have trouble doing that.
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A wise man once told me, always temper expectations lol

Originally posted by @Alan E. :

You make your money when you buy, etc.

If I were to buy a 3 br 2 bth single family in a desirable neighborhood, no repairs needed, traditional financing with a 30yr fixed rate mortgage, would i be making a bad investment if I purchased the property through a realtor?

Listening to Brandon's Podcast here makes me think that i need to buy a property that is falling into a sinkhole and covered in black mold and then get my "Justice League" of contractors to fix it up before I can make a profit off of it (using the BRRR strategy).

I desperately want to jump off the high dive into real estate investing but Im deterred because I dont want to buy a property with more cigarette smoke damage than a 1950s casino. Am i being unrealistic? Can i buy something through a realtor and have managed by a professional property manager (assume 10% commission) to make it worth my while?

For discussion lets assume typical Midwest suburbia.

 Alan,

You know what one of the biggest secrets in this business is? It's that you can pretty much make money owning any piece of reasonable real estate. It doesn't really matter if you own it long enough and bought it for a reasonable price you will eventually make money. Think about it. You are gonna target something decent in the cheap Midwest. You will use 3/4 of the bank's money to buy it while your tenant pays back the bank. If you purchase a $100k house you are only using $25k of your own money. 30 years later it's likely worth at a minimum $100k but remember you only spent $25k of YOUR money to buy it. This doesn't account for cash flow, appreciation or tax benefits.

Real Estate is a great & proven investment vehicle. I think most people need to keep it simple like you are planning on doing. Stuff like BRRRR sells books & courses man. The boring stuff like what you want to do doesn't. That's why you don't hear anybody talking about it.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

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