Long-Distance Real Estate Investing - BRRR Analysis Paralysis

46 Replies

Originally posted by @Chris Lopez :

@Brian Garrett I don't know the details. I'm not sure if it was just equity, or equity + PM fee. He bought a 15 house portfolio with an average price of 20k per house. Very low-end stuff with an average of 15% vacancy. That's why he got a PM to get skin in the game. It struck as the best idea I've heard in a long time for out of state investing.

I did this with 350 homes my PM was equity partner.. sold out in 2013  happy days.... but it does work but not easy to get a PM to do this.. as they still need monthly income to run their business I had a very complicated transaction that would be too hard to describe.

but needless to say a few of our markets we killed it in.. Atlanta being one.. we sold and doubled our money in 20 months.. happy days.

other markets not so much 

@Brandon Cravens The only reason I am limiting myself to one region for now is to focus my limited time for networking and analysis to one area. If I find a deal in another location and I can easily find the people to help me buy and hold it then I'll do that, otherwise I'll wholesale it. I'll keep you in mind if somehow something in North or West Houston comes across my path.

Edit: After some thought I would not say that I am limiting myself to one region, but that I am focusing on one region.

The secret to out of state investing for ME is finding local partners. I did a long distance BRRRR deal as my first investment out of state and was in the process of getting hosed when I realized it, fired my contractor, and came to KC for a week a month until my project was done correctly. It was a nightmare while it was going on but I learned a ton and I met local people. Now I really love my out of state market and even think I could probably live with the humidity to never pay CA prices for anything again.

Now I look for KC investments with local partners, and it is 100% worth giving up half the deal in order to have someone local watching over your project daily and someone who has interests that are ALIGNED with yours. David Greene's system might be great with volume, but on your first deal you won't have volume. So I suggest networking and finding locals who want to work with you in exchange for you putting in more capital. Just my 2 cents on a BRRRR deal. The other thing is, that all commercial properties are BRRRR because they are valued on income. Residential lenders will NOT see the value that you have put into buildings, it is very hard to get a property re-appraised for more than you paid for it in my experience. My other suggestion is to just go to commercial on your first BRRRR, it could be something small, even a 2-4 unit can get a commercial loan.

@Lee Ripma wow thanks, your post really helps and I appreciate the advise! I have been under the impression that commercial financing would be more difficult for someone without a lot of experience under their belt to acquire than the conventional or hard money approach. Have you seen this to be the case? Also what (if any) elements of the BRRR strategy would change using commercial financing?

@reese C. I'd call around to commercial banks and find one that will work with you. It is harder to be out of state but you'll be able to find one that will work with you. Plus if you have a local partner and you form an LLC or partnership together, then you are in state. You'll hear on the podcast all the time that someone had to go to 12 banks before someone would lend to them, so budget time for finding the right bank.

So BRRRR presumes you can raise the value of a property and then get someone to recognize that and give you a higher appraised value. I have had a hell of a time getting banks to do that when they see the property as valued on comps. When banks do a refi, even after seasoning of 6 months, they are so stuck on what you originally paid! They don't want to give you an appraised value that is higher. Even when I paid cash and had done major repairs. I have been through this first hand. They are passing off the residential loans to the government and the government doesn't want to get stuck holding a loan that is highly inflated, so they have underwriting guidelines to prevent it (for a good reason, remember 2009?).

Commercial banks are portfolio lenders, meaning that they hold the notes on their own books. So if the notes go bad, the commercial bank losses out. They can make up their own underwriting guidelines and a lot of it is based on your perceived ability to pay back the loan. So I think that the refinance piece of BRRRR is best done with a commercial bank if you are talking about income producing rental properties. You can get your property valued based on income, so it is perfect for small MF 2-4 units. Yes, you can get a commercial loan on under 5 units!

A quick and dirty valuation based on a commercial appraisal is a 100 gross rent multiplier, which is really just the 1% rule stated another way. So if you want to know how you can raise the value of a commercial building then look at the rents now and multiply that by 100. The ARV will be the rents after fix up x100.

So lets say you buy a triplex that really needs renovations and the rents are very low. Let's say the tenats are pay 400/mo but the units are big and are in a good area. Your quick and dirty value right now is 400x3x100=120000. But after you fix them up you can get 700. So your ARV is 700x3x100=210000. Check that out! You nearly doubled your value! I my experience you will never get a residential bank to see that, but a commercial bank will.

Now the 100 GRM is just quick and dirty, you should learn how to value a building on its cap rate too. It sounds complicated, but it really isn't. You just look at the market cap of the area (for rental props often 7-9) then look at a year. How much money does it make? How much are the expenses? The difference is your net operating income. Divide the net operating income by the cap and you have the value. So in my ARV above the income was 2100 a month or 25,200 a year. Let's say my expenses are 40% of that (actually caculate the expenses, don't use a percent). So my NOI is 25,200-(25,200*.4)=15,120. Just take the NOI and divide by the cap rate. At an 8 cap it is 189,000. So your ARV is going to be 189-210k. So you created massive value by upping the NOI on the property. A commercial bank will see that. A residential bank will look at comps and never give you a cash out refi at that increased value.

In fact you can even buy an underperforming property with a residential loan, fix it up, and use a commercial cash out to get your money back. 

On your first couple expect that they will make you leave 20% of your capital in. As you become a trusted borrower they will let you go to higher loan to value notes. 

So pick your market, network locally, go meet with the bankers, and get going on creating value in rental properties! 

Sort of a long-winded answer but this is a strategy that I don't hear anyone talk about for small MF BRRRR properties.

Originally posted by @Caleb Heimsoth :

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

 Risk/reward.  Those who bought the "war zone" in Chicago and Detroit are looking real good right now.  Also, the A properties became depressed and created an opportunity for entry.   

Originally posted by @Jay Hinrichs :
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky.. there is thread after thread on BP of folks who have tried this that lost all their money.. A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with.. And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

Originally posted by @Daniel Akerman :
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Originally posted by @Jay Hinrichs :
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Originally posted by @Reese C. :
Originally posted by @Jay Hinrichs:
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Yup it all starts and ends with the GC... along with third party inspections that you pay for.. and controls on draws and lein waivers.

just look at how any hml company sets up their draw process and emulate that..

Originally posted by @Jay Hinrichs :
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Yup it all starts and ends with the GC... along with third party inspections that you pay for.. and controls on draws and lein waivers.

just look at how any hml company sets up their draw process and emulate that..

Thanks Jay

Are there any tips you have or questions you ask to weed out good GCs from bad?

Originally posted by @Reese C. :
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Yup it all starts and ends with the GC... along with third party inspections that you pay for.. and controls on draws and lein waivers.

just look at how any hml company sets up their draw process and emulate that..

Thanks Jay

Are there any tips you have or questions you ask to weed out good GCs from bad?

please don't take offense . however if your at this point you really should partner with someone with a good amount of experience and showdown them.. your the Mark that many of these contractors look for. you are going to have a very hard time learning this in a book.

Just sayin..  

and I guess the bottom line Is when your talking these lower value assets IE under 100k rentals.. what are you saving the turn key guys are making 10 to 15k doing it all  .. you probably cant buy as cheap as they do and you probably cant rehab as cheap as they can and then you have to go through your learning curve.. is it worth 10 to 15k to lose 10 to 30k ??? and what is that a month 50 bucks.. is it worth 50 bucks a month or a 100 a month over time to risk this.. not to mention all your time and energy.. I mean you have to go there and have to show up.. if you think you can do this all remotely I just caution you..

I cant tell you how many deals I see from 1/2 finished or 3/4 finish homes where the owner is dumping it after losing untold amounts of money..  

So case in point my GC in Charleston.. were I am doing 500 to 2 million dollar new builds.. He is a long time family friend .. X coast guard champion in marshal arts.. and one heck of a GC and he can strap on belt when needed.. but even that we have controlled draws with inspections .. our banks require it.

But what happens is he has credit at the lumber yard and other places and the draws are for work done and in place.

your going to have a very hard time finding contractors for low end rental rehabs that can carry a tune.. IE carry a job.. they will all want deposits before they start.. and that is the risk.. you send the money its not spent were it should have gone.. and boom. you have no controls.  and or they are very poor at what they do and that's why the only work they can do is a 15k rehab for you.. there is no money in it they can only hire the worst of the worst day laborers and your workmanship sucks..  on and on and on..  

now if your going to do 20 or 30 in year and etc that can change but to think you can do one pretty tough.. honestly..

and not sure its worth the risk.

I know two or three turn key guys that do turn key light these are respected clients of mine that have been doing this for a decade or longer .. rehabbed 500 homes at least.. and they will do everything you want to do the BRRR and charge a flat fee of 6 to 8k.. but that assures you a quality product at the end .. and you get what you pay for. you don't get ripped off.. I call this turn key light.

But I get it if its your burning desire to do this and I have given you the contrarian view points and the book has given you safety measures as well.. then go for and I do wish you the best of luck.. of course some of these folks will do fine but a big number get hammered .. the question is do you want to risk it.  

If you said Hey I own 10 rentals and have been working in and around real estate for 5 years and understand how these rehabs basically go because I am doing turn overs in my units.. then I get that..  but someone with zero experience is who I am talking about and I don't know it your the latter or the former.  just sayin

Originally posted by @Jay Hinrichs :
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Yup it all starts and ends with the GC... along with third party inspections that you pay for.. and controls on draws and lein waivers.

just look at how any hml company sets up their draw process and emulate that..

Thanks Jay

Are there any tips you have or questions you ask to weed out good GCs from bad?

please don't take offense . however if your at this point you really should partner with someone with a good amount of experience and showdown them.. your the Mark that many of these contractors look for. you are going to have a very hard time learning this in a book.

Just sayin..  

and I guess the bottom line Is when your talking these lower value assets IE under 100k rentals.. what are you saving the turn key guys are making 10 to 15k doing it all  .. you probably cant buy as cheap as they do and you probably cant rehab as cheap as they can and then you have to go through your learning curve.. is it worth 10 to 15k to lose 10 to 30k ??? and what is that a month 50 bucks.. is it worth 50 bucks a month or a 100 a month over time to risk this.. not to mention all your time and energy.. I mean you have to go there and have to show up.. if you think you can do this all remotely I just caution you..

I cant tell you how many deals I see from 1/2 finished or 3/4 finish homes where the owner is dumping it after losing untold amounts of money..  

So case in point my GC in Charleston.. were I am doing 500 to 2 million dollar new builds.. He is a long time family friend .. X coast guard champion in marshal arts.. and one heck of a GC and he can strap on belt when needed.. but even that we have controlled draws with inspections .. our banks require it.

But what happens is he has credit at the lumber yard and other places and the draws are for work done and in place.

your going to have a very hard time finding contractors for low end rental rehabs that can carry a tune.. IE carry a job.. they will all want deposits before they start.. and that is the risk.. you send the money its not spent were it should have gone.. and boom. you have no controls.  and or they are very poor at what they do and that's why the only work they can do is a 15k rehab for you.. there is no money in it they can only hire the worst of the worst day laborers and your workmanship sucks..  on and on and on..  

now if your going to do 20 or 30 in year and etc that can change but to think you can do one pretty tough.. honestly..

and not sure its worth the risk.

I know two or three turn key guys that do turn key light these are respected clients of mine that have been doing this for a decade or longer .. rehabbed 500 homes at least.. and they will do everything you want to do the BRRR and charge a flat fee of 6 to 8k.. but that assures you a quality product at the end .. and you get what you pay for. you don't get ripped off.. I call this turn key light.

But I get it if its your burning desire to do this and I have given you the contrarian view points and the book has given you safety measures as well.. then go for and I do wish you the best of luck.. of course some of these folks will do fine but a big number get hammered .. the question is do you want to risk it.  

If you said Hey I own 10 rentals and have been working in and around real estate for 5 years and understand how these rehabs basically go because I am doing turn overs in my units.. then I get that..  but someone with zero experience is who I am talking about and I don't know it your the latter or the former.  just sayin

When you feel that your first line to your response should be "don't take offense", you can almost guarantee that the person receiving it will be offended. 

Unless I am on the wrong website, I thought Bigger Pockets was a platform to learn, share and exchange and advise. I'm not sure how my simple question on how YOU weed out good GC's from the bad set off this response. However, my thought was that by asking it, you may have some wisdom that people of all levels of investment experience may say "oh, that's good a good one, I didn't think about that."

I like to gather information and make an informed decision from there. That's why I am here. To ask questions. 

At this point, I'm not sure if it is productive for your time to spend any additional time on this thread. Just saying...

Originally posted by @Reese C. :
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Yup it all starts and ends with the GC... along with third party inspections that you pay for.. and controls on draws and lein waivers.

just look at how any hml company sets up their draw process and emulate that..

Thanks Jay

Are there any tips you have or questions you ask to weed out good GCs from bad?

please don't take offense . however if your at this point you really should partner with someone with a good amount of experience and showdown them.. your the Mark that many of these contractors look for. you are going to have a very hard time learning this in a book.

Just sayin..  

and I guess the bottom line Is when your talking these lower value assets IE under 100k rentals.. what are you saving the turn key guys are making 10 to 15k doing it all  .. you probably cant buy as cheap as they do and you probably cant rehab as cheap as they can and then you have to go through your learning curve.. is it worth 10 to 15k to lose 10 to 30k ??? and what is that a month 50 bucks.. is it worth 50 bucks a month or a 100 a month over time to risk this.. not to mention all your time and energy.. I mean you have to go there and have to show up.. if you think you can do this all remotely I just caution you..

I cant tell you how many deals I see from 1/2 finished or 3/4 finish homes where the owner is dumping it after losing untold amounts of money..  

So case in point my GC in Charleston.. were I am doing 500 to 2 million dollar new builds.. He is a long time family friend .. X coast guard champion in marshal arts.. and one heck of a GC and he can strap on belt when needed.. but even that we have controlled draws with inspections .. our banks require it.

But what happens is he has credit at the lumber yard and other places and the draws are for work done and in place.

your going to have a very hard time finding contractors for low end rental rehabs that can carry a tune.. IE carry a job.. they will all want deposits before they start.. and that is the risk.. you send the money its not spent were it should have gone.. and boom. you have no controls.  and or they are very poor at what they do and that's why the only work they can do is a 15k rehab for you.. there is no money in it they can only hire the worst of the worst day laborers and your workmanship sucks..  on and on and on..  

now if your going to do 20 or 30 in year and etc that can change but to think you can do one pretty tough.. honestly..

and not sure its worth the risk.

I know two or three turn key guys that do turn key light these are respected clients of mine that have been doing this for a decade or longer .. rehabbed 500 homes at least.. and they will do everything you want to do the BRRR and charge a flat fee of 6 to 8k.. but that assures you a quality product at the end .. and you get what you pay for. you don't get ripped off.. I call this turn key light.

But I get it if its your burning desire to do this and I have given you the contrarian view points and the book has given you safety measures as well.. then go for and I do wish you the best of luck.. of course some of these folks will do fine but a big number get hammered .. the question is do you want to risk it.  

If you said Hey I own 10 rentals and have been working in and around real estate for 5 years and understand how these rehabs basically go because I am doing turn overs in my units.. then I get that..  but someone with zero experience is who I am talking about and I don't know it your the latter or the former.  just sayin

When you feel that your first line to your response should be "don't take offense", you can almost guarantee that the person receiving it will be offended. 

Unless I am on the wrong website, I thought Bigger Pockets was a platform to learn, share and exchange and advise. I'm not sure how my simple question on how YOU weed out good GC's from the bad set off this response. However, my thought was that by asking it, you may have some wisdom that people of all levels of investment experience may say "oh, that's good a good one, I didn't think about that."

I like to gather information and make an informed decision from there. That's why I am here. To ask questions. 

At this point, I'm not sure if it is productive for your time to spend any additional time on this thread. Just saying...

Someone with a lot of experience took the time to share with you.  It may not have been what you wanted to hear, but you have been warned.

There are many roads to success. One man's perspective is just that.

There are a hundred things that can go wrong for everything that one could do. Once again, the question is not IF, its WHERE and HOW. 

Thanks everyone that provided valuable information and contributed to a constructive conversation. 

Originally posted by @Eric James :
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Yup it all starts and ends with the GC... along with third party inspections that you pay for.. and controls on draws and lein waivers.

just look at how any hml company sets up their draw process and emulate that..

Thanks Jay

Are there any tips you have or questions you ask to weed out good GCs from bad?

please don't take offense . however if your at this point you really should partner with someone with a good amount of experience and showdown them.. your the Mark that many of these contractors look for. you are going to have a very hard time learning this in a book.

Just sayin..  

and I guess the bottom line Is when your talking these lower value assets IE under 100k rentals.. what are you saving the turn key guys are making 10 to 15k doing it all  .. you probably cant buy as cheap as they do and you probably cant rehab as cheap as they can and then you have to go through your learning curve.. is it worth 10 to 15k to lose 10 to 30k ??? and what is that a month 50 bucks.. is it worth 50 bucks a month or a 100 a month over time to risk this.. not to mention all your time and energy.. I mean you have to go there and have to show up.. if you think you can do this all remotely I just caution you..

I cant tell you how many deals I see from 1/2 finished or 3/4 finish homes where the owner is dumping it after losing untold amounts of money..  

So case in point my GC in Charleston.. were I am doing 500 to 2 million dollar new builds.. He is a long time family friend .. X coast guard champion in marshal arts.. and one heck of a GC and he can strap on belt when needed.. but even that we have controlled draws with inspections .. our banks require it.

But what happens is he has credit at the lumber yard and other places and the draws are for work done and in place.

your going to have a very hard time finding contractors for low end rental rehabs that can carry a tune.. IE carry a job.. they will all want deposits before they start.. and that is the risk.. you send the money its not spent were it should have gone.. and boom. you have no controls.  and or they are very poor at what they do and that's why the only work they can do is a 15k rehab for you.. there is no money in it they can only hire the worst of the worst day laborers and your workmanship sucks..  on and on and on..  

now if your going to do 20 or 30 in year and etc that can change but to think you can do one pretty tough.. honestly..

and not sure its worth the risk.

I know two or three turn key guys that do turn key light these are respected clients of mine that have been doing this for a decade or longer .. rehabbed 500 homes at least.. and they will do everything you want to do the BRRR and charge a flat fee of 6 to 8k.. but that assures you a quality product at the end .. and you get what you pay for. you don't get ripped off.. I call this turn key light.

But I get it if its your burning desire to do this and I have given you the contrarian view points and the book has given you safety measures as well.. then go for and I do wish you the best of luck.. of course some of these folks will do fine but a big number get hammered .. the question is do you want to risk it.  

If you said Hey I own 10 rentals and have been working in and around real estate for 5 years and understand how these rehabs basically go because I am doing turn overs in my units.. then I get that..  but someone with zero experience is who I am talking about and I don't know it your the latter or the former.  just sayin

When you feel that your first line to your response should be "don't take offense", you can almost guarantee that the person receiving it will be offended. 

Unless I am on the wrong website, I thought Bigger Pockets was a platform to learn, share and exchange and advise. I'm not sure how my simple question on how YOU weed out good GC's from the bad set off this response. However, my thought was that by asking it, you may have some wisdom that people of all levels of investment experience may say "oh, that's good a good one, I didn't think about that."

I like to gather information and make an informed decision from there. That's why I am here. To ask questions. 

At this point, I'm not sure if it is productive for your time to spend any additional time on this thread. Just saying...

Someone with a lot of experience took the time to share with you.  It may not have been what you wanted to hear, but you have been warned.

Well I do apologize if I was blunt.. however there is this company called Morris invest.. you should check out the threads.

and from day one I called BS on this company and guy.. and went on for hundreds of posts.. me repeating the risk these folks were taking and the investors thinking I was just nuts ..

well here we are 2 years later over 400 investor going to lose a little to everything.. some their entire lifes savings.. I get about one PM a day from those who actually listened to what I had to say and thank me.. for having them take pause and then do something different and not get caught up in that HUGE MESS.. and I was not the only.. one but I am the first to say it BLUNT was putting it mildly.

BP is about folks helping and since I have been lending to rehabbers in all these markets for about 2 decades I think I do have some solid advice and generally its just this.. Highly risky.. if you have never done it at home and have a lot of experience even more risky.

and maybe some other method would be safer.. that's all.. I know the way the scheme is presented it sounds great and all.. but so do all guru's selling systems ..  and its a tough one.. one reason the flipping gurus can sell their how to for 40k.. so many people think they want to do it but have no experience. And they try to buy their way in be it the big time guru or the 10 dollar book.

My main point is there is nothing more risky than what is talked about in that scheme.

There was not a worse investment than what Morris did to all those nice folks..   20 years 3 thousand plus fundings in the space believe me I have been screwed over every which way you can be.. there is no one perfect and I certainly am not..

And I think one thing that got me going on this as well. is there was 3 folks from Denver about 3 years ago that tried this in Atlanta and all three got with a smooth talking GC and all three lost everything. and we are talking over 200k in the aggregate lost..

So to go into these low value assets this author was talking about in Jacksonville ( which Morris has sold a bunch of junk there as well) I am just cringing. Folks tend to take advice from BP on the blue sky stuff with irrational exuberance.. so just trying to balance the scales like any good Libra would do..   

Originally posted by @Jay Hinrichs :
Originally posted by @Eric James:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Yup it all starts and ends with the GC... along with third party inspections that you pay for.. and controls on draws and lein waivers.

just look at how any hml company sets up their draw process and emulate that..

Thanks Jay

Are there any tips you have or questions you ask to weed out good GCs from bad?

please don't take offense . however if your at this point you really should partner with someone with a good amount of experience and showdown them.. your the Mark that many of these contractors look for. you are going to have a very hard time learning this in a book.

Just sayin..  

and I guess the bottom line Is when your talking these lower value assets IE under 100k rentals.. what are you saving the turn key guys are making 10 to 15k doing it all  .. you probably cant buy as cheap as they do and you probably cant rehab as cheap as they can and then you have to go through your learning curve.. is it worth 10 to 15k to lose 10 to 30k ??? and what is that a month 50 bucks.. is it worth 50 bucks a month or a 100 a month over time to risk this.. not to mention all your time and energy.. I mean you have to go there and have to show up.. if you think you can do this all remotely I just caution you..

I cant tell you how many deals I see from 1/2 finished or 3/4 finish homes where the owner is dumping it after losing untold amounts of money..  

So case in point my GC in Charleston.. were I am doing 500 to 2 million dollar new builds.. He is a long time family friend .. X coast guard champion in marshal arts.. and one heck of a GC and he can strap on belt when needed.. but even that we have controlled draws with inspections .. our banks require it.

But what happens is he has credit at the lumber yard and other places and the draws are for work done and in place.

your going to have a very hard time finding contractors for low end rental rehabs that can carry a tune.. IE carry a job.. they will all want deposits before they start.. and that is the risk.. you send the money its not spent were it should have gone.. and boom. you have no controls.  and or they are very poor at what they do and that's why the only work they can do is a 15k rehab for you.. there is no money in it they can only hire the worst of the worst day laborers and your workmanship sucks..  on and on and on..  

now if your going to do 20 or 30 in year and etc that can change but to think you can do one pretty tough.. honestly..

and not sure its worth the risk.

I know two or three turn key guys that do turn key light these are respected clients of mine that have been doing this for a decade or longer .. rehabbed 500 homes at least.. and they will do everything you want to do the BRRR and charge a flat fee of 6 to 8k.. but that assures you a quality product at the end .. and you get what you pay for. you don't get ripped off.. I call this turn key light.

But I get it if its your burning desire to do this and I have given you the contrarian view points and the book has given you safety measures as well.. then go for and I do wish you the best of luck.. of course some of these folks will do fine but a big number get hammered .. the question is do you want to risk it.  

If you said Hey I own 10 rentals and have been working in and around real estate for 5 years and understand how these rehabs basically go because I am doing turn overs in my units.. then I get that..  but someone with zero experience is who I am talking about and I don't know it your the latter or the former.  just sayin

When you feel that your first line to your response should be "don't take offense", you can almost guarantee that the person receiving it will be offended. 

Unless I am on the wrong website, I thought Bigger Pockets was a platform to learn, share and exchange and advise. I'm not sure how my simple question on how YOU weed out good GC's from the bad set off this response. However, my thought was that by asking it, you may have some wisdom that people of all levels of investment experience may say "oh, that's good a good one, I didn't think about that."

I like to gather information and make an informed decision from there. That's why I am here. To ask questions. 

At this point, I'm not sure if it is productive for your time to spend any additional time on this thread. Just saying...

Someone with a lot of experience took the time to share with you.  It may not have been what you wanted to hear, but you have been warned.

Well I do apologize if I was blunt.. however there is this company called Morris invest.. you should check out the threads.

and from day one I called BS on this company and guy.. and went on for hundreds of posts.. me repeating the risk these folks were taking and the investors thinking I was just nuts ..

well here we are 2 years later over 400 investor going to lose a little to everything.. some their entire lifes savings.. I get about one PM a day from those who actually listened to what I had to say and thank me.. for having them take pause and then do something different and not get caught up in that HUGE MESS.. and I was not the only.. one but I am the first to say it BLUNT was putting it mildly.

BP is about folks helping and since I have been lending to rehabbers in all these markets for about 2 decades I think I do have some solid advice and generally its just this.. Highly risky.. if you have never done it at home and have a lot of experience even more risky.

and maybe some other method would be safer.. that's all.. I know the way the scheme is presented it sounds great and all.. but so do all guru's selling systems ..  and its a tough one.. one reason the flipping gurus can sell their how to for 40k.. so many people think they want to do it but have no experience. And they try to buy their way in be it the big time guru or the 10 dollar book.

My main point is there is nothing more risky than what is talked about in that scheme.

There was not a worse investment than what Morris did to all those nice folks..   20 years 3 thousand plus fundings in the space believe me I have been screwed over every which way you can be.. there is no one perfect and I certainly am not..

And I think one thing that got me going on this as well. is there was 3 folks from Denver about 3 years ago that tried this in Atlanta and all three got with a smooth talking GC and all three lost everything. and we are talking over 200k in the aggregate lost..

So to go into these low value assets this author was talking about in Jacksonville ( which Morris has sold a bunch of junk there as well) I am just cringing. Folks tend to take advice from BP on the blue sky stuff with irrational exuberance.. so just trying to balance the scales like any good Libra would do..   

Hi Jay,

Maybe I took the response harder than I should have. I do appreciate your perspective.

From my perspective as a new investor there are many different ideas, stories and content that are circulating of how to approach this type of investing. One investor finds success while another finds failure following a similar strategy. The differences seems to be the details and the processes employed, the stuff most tend to leave out when telling their story.

There also is a lot of people that say what can't be done and not a lot of clarity on how to make an approach work.

Turn key may be the best strategy for me but I think at some point I believe opening options beyond ones back door will be needed to expand. 

Originally posted by @Reese C. :
Originally posted by @Jay Hinrichs:
Originally posted by @Eric James:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Reese C.:
Originally posted by @Jay Hinrichs:
Originally posted by @Daniel Akerman:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

Reese C. I live in Raleigh. You can reach out to me if you want some basic understanding of the market here.

I also invest long distance (Cleveland and Memphis) and I would not do BRRR long distance like Jay Hinrichs says.

The big dirty secret on BP is everyone talks about returns but they don’t talk about risk. You have to adjust your return expectations to manage the risk.

Could I go buy a whole city block in a war zone in Detroit? Sure! But why would I? The risk doesn’t justify the return potential.

I'm not sure what returns you want but having bought basic (cosmetic rehab) or totally turnkey properties so far my total return (cash flow, appreciation, loan paydown) is greater than 15 percent and my IRR is greater than 20.

Great returns much less risk then what you’re wanting to do. Just food for thought.

one thing to remember the author of that book is a high producing real estate broker with probably a lot of wherewithal.. and a ton of experience.. so yes what he talks about can happen.. but is it appropriate to advise those who have never done it and or on much tighter budgets and no real experience.. in my ever it to be humble opinion NO.. HIGHLY risky..  there is thread after thread on BP of folks who have tried this that lost all their money..  A lot of things have to go right.. and rehab contractors on lower end properties are as risky a person or business you can possibly align yourself with..  And a top producing agent in a market is NO way going to work with one off 50k buyer and marshal their whole rehab.. those folks would go broke.. they will sell you the home and wish you a good day.. :)

 Jay, we meet -- and respectfully disagree -- again!

1. David Greene, whose book I've read and who I've spoken to, is relatively new to being a broker. He was an investor first, and invested out of state while being a full-time police officer in the S.F. Bay Area. He was not a full-time investor for a very long time, and did not go into real estate full-time until relatively recently. (Full disclosure, David and I are both agents with Keller Williams, though I am in NYC.)

2. The book goes into quite a bit of detail as to how to mitigate risk and leverage the various parts of your team to keep the others accountable. Saying that out of state BRRR is impossible or unlikely is demonstrably false, because there are people that do it all the time, and not necessarily people with vast experience.

3. It's true that plenty of people lose their money when investing out of state, but that doesn't necessarily indicate that it was BECAUSE they were investing out of state. It's entirely possible those same people would have lost their money investing in their own backyards. Investing out of state, done properly, is not really that much riskier than investing in your own neighborhood and doesn't have that much about it that's any different from investing across the street. As David rightly points out in his book: a typical car owner doesn't know the operation of their engine well enough to keep a mechanic accountable. Yet, we leave our cars with mechanics every day. A typical person, likewise, doesn't know construction and engineering issues very well, and has the same level of knowledge to hold a contractor accountable whether they are across the street or in another state. The accountability comes in how you manage the process. And that is no longer tied down to your local market.

4. I will agree with you, Jay, that most agents, and especially high-performing ones, will not give the time of day to a one-off investor looking to spend $50,000 (though, to be fair, OP says he's spending $40,000 for a DP, so one can assume a purchase of maybe $80-100k.) However, BRRR implies it wouldn't be a one-off relationship, and repeat business is something ALL agents love. One of David's points, on which I agree, is that letting an agent know you plan on doing several deals and want ONE agent to work with will go a long way to winning them over.

going to be a lot of people lose a lot of money thinking this can be done as described.. but one thing I agree with you can lose money on any flip.. I know being a HML for many years I have seen enough of my payoffs were I was the only one who made money and or the borrower lost money.. far more prevalent than one would think. So the point is BP being the land of predominantly beginners there is irrational exuberance that this can be done.. theories are great.. and analogies are great but reality it can be a beotch.

Top producing agents unless your American homes for rent or some other hedge fund that are going to be buying 10 to 50 homes a month are not going to give many one time out of state newbies much love in this..  Newer agents you stand a better chance getting their attention.   

I like the BRRR concept and I fund a few folks that do that for their clients fee based.. but they are not brokers.. they are VERY experienced flippers with substantial portfolios themselves.. that is far better for the out of state investors than trying to do this as described by the book..

Hi Jay

I think we all are aware of the risk and understand that if things go south, real money will be lost. I think we in this thread are beyond the question of IF we should do this and on to HOW do we make it happen (which is more productive in my opinion). 

I have heard a lot of good ideas since this thread started to maximize the likelihood for success and i appreciate the pointers. Since you are a seasoned investor that we could all learn from do you have any strategies or ideas that an investor in my position could implement to make this a reality? Are there some lessons you learned when you managed your first out of region deal?

Yup it all starts and ends with the GC... along with third party inspections that you pay for.. and controls on draws and lein waivers.

just look at how any hml company sets up their draw process and emulate that..

Thanks Jay

Are there any tips you have or questions you ask to weed out good GCs from bad?

please don't take offense . however if your at this point you really should partner with someone with a good amount of experience and showdown them.. your the Mark that many of these contractors look for. you are going to have a very hard time learning this in a book.

Just sayin..  

and I guess the bottom line Is when your talking these lower value assets IE under 100k rentals.. what are you saving the turn key guys are making 10 to 15k doing it all  .. you probably cant buy as cheap as they do and you probably cant rehab as cheap as they can and then you have to go through your learning curve.. is it worth 10 to 15k to lose 10 to 30k ??? and what is that a month 50 bucks.. is it worth 50 bucks a month or a 100 a month over time to risk this.. not to mention all your time and energy.. I mean you have to go there and have to show up.. if you think you can do this all remotely I just caution you..

I cant tell you how many deals I see from 1/2 finished or 3/4 finish homes where the owner is dumping it after losing untold amounts of money..  

So case in point my GC in Charleston.. were I am doing 500 to 2 million dollar new builds.. He is a long time family friend .. X coast guard champion in marshal arts.. and one heck of a GC and he can strap on belt when needed.. but even that we have controlled draws with inspections .. our banks require it.

But what happens is he has credit at the lumber yard and other places and the draws are for work done and in place.

your going to have a very hard time finding contractors for low end rental rehabs that can carry a tune.. IE carry a job.. they will all want deposits before they start.. and that is the risk.. you send the money its not spent were it should have gone.. and boom. you have no controls.  and or they are very poor at what they do and that's why the only work they can do is a 15k rehab for you.. there is no money in it they can only hire the worst of the worst day laborers and your workmanship sucks..  on and on and on..  

now if your going to do 20 or 30 in year and etc that can change but to think you can do one pretty tough.. honestly..

and not sure its worth the risk.

I know two or three turn key guys that do turn key light these are respected clients of mine that have been doing this for a decade or longer .. rehabbed 500 homes at least.. and they will do everything you want to do the BRRR and charge a flat fee of 6 to 8k.. but that assures you a quality product at the end .. and you get what you pay for. you don't get ripped off.. I call this turn key light.

But I get it if its your burning desire to do this and I have given you the contrarian view points and the book has given you safety measures as well.. then go for and I do wish you the best of luck.. of course some of these folks will do fine but a big number get hammered .. the question is do you want to risk it.  

If you said Hey I own 10 rentals and have been working in and around real estate for 5 years and understand how these rehabs basically go because I am doing turn overs in my units.. then I get that..  but someone with zero experience is who I am talking about and I don't know it your the latter or the former.  just sayin

When you feel that your first line to your response should be "don't take offense", you can almost guarantee that the person receiving it will be offended. 

Unless I am on the wrong website, I thought Bigger Pockets was a platform to learn, share and exchange and advise. I'm not sure how my simple question on how YOU weed out good GC's from the bad set off this response. However, my thought was that by asking it, you may have some wisdom that people of all levels of investment experience may say "oh, that's good a good one, I didn't think about that."

I like to gather information and make an informed decision from there. That's why I am here. To ask questions. 

At this point, I'm not sure if it is productive for your time to spend any additional time on this thread. Just saying...

Someone with a lot of experience took the time to share with you.  It may not have been what you wanted to hear, but you have been warned.

Well I do apologize if I was blunt.. however there is this company called Morris invest.. you should check out the threads.

and from day one I called BS on this company and guy.. and went on for hundreds of posts.. me repeating the risk these folks were taking and the investors thinking I was just nuts ..

well here we are 2 years later over 400 investor going to lose a little to everything.. some their entire lifes savings.. I get about one PM a day from those who actually listened to what I had to say and thank me.. for having them take pause and then do something different and not get caught up in that HUGE MESS.. and I was not the only.. one but I am the first to say it BLUNT was putting it mildly.

BP is about folks helping and since I have been lending to rehabbers in all these markets for about 2 decades I think I do have some solid advice and generally its just this.. Highly risky.. if you have never done it at home and have a lot of experience even more risky.

and maybe some other method would be safer.. that's all.. I know the way the scheme is presented it sounds great and all.. but so do all guru's selling systems ..  and its a tough one.. one reason the flipping gurus can sell their how to for 40k.. so many people think they want to do it but have no experience. And they try to buy their way in be it the big time guru or the 10 dollar book.

My main point is there is nothing more risky than what is talked about in that scheme.

There was not a worse investment than what Morris did to all those nice folks..   20 years 3 thousand plus fundings in the space believe me I have been screwed over every which way you can be.. there is no one perfect and I certainly am not..

And I think one thing that got me going on this as well. is there was 3 folks from Denver about 3 years ago that tried this in Atlanta and all three got with a smooth talking GC and all three lost everything. and we are talking over 200k in the aggregate lost..

So to go into these low value assets this author was talking about in Jacksonville ( which Morris has sold a bunch of junk there as well) I am just cringing. Folks tend to take advice from BP on the blue sky stuff with irrational exuberance.. so just trying to balance the scales like any good Libra would do..   

Hi Jay,

Maybe I took the response harder than I should have. I do appreciate your perspective.

From my perspective as a new investor there are many different ideas, stories and content that are circulating of how to approach this type of investing. One investor finds success while another finds failure following a similar strategy. The differences seems to be the details and the processes employed, the stuff most tend to leave out when telling their story.

There also is a lot of people that say what can't be done and not a lot of clarity on how to make an approach work.

Turn key may be the best strategy for me but I think at some point I believe opening options beyond ones back door will be needed to expand. 

just becasue I started the turnkey review site as a public service is not me endorsing any company or the model.. I think that model has cleaned up there act with the help of the internet although Morris slipped through.

rental houses are not complicated and in every market you can find them right on MLS do a normal home inspection get copies of existing leases and buy that way.. end of they day WE ALL agree that PM will make or break your ability to have a calm rewarding experience in landlording.. so you got both sides of the coin see which one fits your risk profiles.. then move forward.

as you say lots of ways to invest.. actually many of my clients prefer to be the bank.. and take all of the tenant and reahab risk out of the equation.. its quite hot right now .. and pretty appropriate for the smaller investor weighing what do to.. 

Anyway.. I think we have drilled into this sufficiently I wish you the best ... On what every path you take.