1st BRRRR Investment

4 Replies

Hello BP!

First time investor here! I have chosen to start out my real estate investing journey out doing the BRRRR strategy. I have done month's of research (I am a over thinker), learned how to analyze and calculate the numbers, I have the capital, I even bought David Greene's BRRRR book and read it TWICE. For some reason I am still nervous because this is sort of like my one and only shot so I don't want anything to go wrong! Although, I believe experience will be my greatest teacher so I just want to jump into it, but I want to make sure I have this process right so there is as minimum risk as possible. I would appreciate any insight on if I should add or subtract something from my mental checklist when purchasing.

1. Find a buyer's agent.

2. Find a home. (70% or less than ARV)

3. Review comps and make sure ARV is accurate.

4. Make an offer to purchase with inspection contingencies.

5. Once accepted, have inspector and contractor evaluate property.

6. If rehab is within budget (rehab+purchase price=70% of ARV) make an offer.

7. If rehab is NOT within budget, change offer to whatever makes the numbers make sense in above equation.

Am I going about this the correct way? It seems simple and easy but almost to easy. Am I missing anything? Should anything be added to this process? If so where? Feel free to share tips or any good advice as well. Thank you all in advance!

@DMikal Mitchell this is the basic formula, but I would encourage you to network to find the right agent who knows your market. In my market, 70% of ARV would be very, very hard to find in today's market. I definitely think you should always buy below market value, but realistically it is pretty tough to find the "perfect" BRRR deal where you get all your money back at the refinance. Instead, I have been encouraging investors I work with in Berwyn and Forest Park (and myself when I buy) to focus on QUALITY. Don't buy in a bad area just to do a "BRRR". If you buy a great building, get it under market value so you can force appreciation to some extent, and use advantageous financing, you will win in the long run.

A lot of folks here on BP were able to BRRR like crazy when there was blood in the streets. Now there is money rolling down the streets looking for deals. This is a time to take cautious, prudent action so that you don't over leverage.

Your only real risk is in losing the asset, so if you buy a great asset that you can manage you will mitigate most of your risk. 

"7. If rehab is NOT within budget, change offer to whatever makes the numbers make sense in above equation."

Sorry but this rarely happens. You will need to learn to better estimate the rehab before you submit any offers. Bring experts into the property when you go look at it. It's one of, if not the hardest part of the BRRRR strategy! I'd factor in another 10% for unknown issues.

@John Warren I am in the Detroit market so it's kind of easy to find 70% of the ARV. But I am definitely not going to sacrifice quality just because the numbers make sense. I am even open to leave a little in the deal as long as it's a quality purchase.

@Jaron Walling ok. I am currently in the process of learning to estimate repair cost but I will also have a contractor present for more accuracy. Just to make sure I have this part correct, once my contractor gives me an estimate I would add the purchase price to that and it should be equal to or less than 70% right? (In order for no money to be left in the deal)