Brandon and David were COMPLETELY WRONG in podcast #327

[Joel Arndt]

First of all, why is there no dedicated BRRRR section in the forums?

Anyway, this is about one point that Brandon and David made in the Bigger Pockets Real Estate Investing Podcast #327. It is an excellent episode and I highly recommend you listen to it. It's all about the BRRRR method.

But I have a beef with ONE point that Brandon made (and David agreed to).

Brandon explains how he is often asked how BRRRRing can work in markets with relatively higher prices. People complain a lot about how expensive it is to buy in their market, making investing in their own backyard next to impossible. That's why you buy David's book "Long Distance Real Estate Investing" because it's is the single most practical guide to investing in properties that you will likely never walk through. David and Brandon make that point first in this episode. 

But then Brandon goes on to say something that I fell is COMPLETELY WRONG.

Brandon says, "Is anyone flipping houses in your market? Because if anyone is flipping houses in your market, you can definitely BRRRR there too."

I understand where he's coming from, and in most cases, this is probably true. But in hotter markets, this isn't always the case.

First, I'm a newb. I've done exactly 1 wholesale deal since I discovered real estate investing 1 year ago. So I look forward to being proven wrong. But from that one deal, and from understanding my market (Hamilton, Ontario), I'll prove that, just because you can flip a house in a market, does NOT mean you can BRRRR as well.

The one deal I've closed was a wholesale assignment to a flipper. I got the house under contract for 430k, the flipper had to put 120k of renos in, and it will sell for 630k - 650k. This house will never cash flow positively as a rental, even if it was converted to a triplex, which would arguable cost more than a straight reno.

Rents are high in that neighbourhood, but not that high. Which brings me to my ultimate point.

The BRRRR method is dependent on many factors, but the single most important factor is the rent you can achieve.