HERE IS WHY THE BRRR METHOD IS NOT WORKING FOR ME
HELLO ALL,
I know I am not a vocal member on BP Community. However, I havnt missed a Podcast. I jumped into my first rental 3 years ago. Im up to 4 now. I cant tell you how many times Ive heard Brandon say he uses the " BRRRR" method, I know I added another R. Here is why this method is not working for me. It doesn't account for closing cost, time, and rehab fees. Not to mention to get a loan you can only get 75% of ARV.
So lets first address time. It takes at least 6mos for your property to " season" so you can get a refinanced loan on it, for my first 2 it took a year. This is an extremely slow process. Im not complaining but at this rate, Im not going to reach my number till im 85. Hearty laugh.
For my first property, I took a HELOC loan on my primary residence. Now after 4 properties heres where im at. The first I purchased cash $47k I cash out refied at 75% of ARV of 56k, giving me $42k. Loss of 5k. Im ok with that because its cash flowing $1000 a month, minus mortgage and ins 600. So -5k. Second property I bought for 70k then 23k in repairs. It cash flows $1150 but is work 120k now. However when I Refi I got 75% of 80k or 56,000. So -14k, add in repairs $-27k. The last 2 properties have not been seasoned yet and I bought cash with the remainder of the HELOC $67k and 70k respectively.
Now I have a maxed out HELOC, 2 properties with 30yr mortgages and 2 under the HELOC. I have 6 mos seasoning on one that I cant yet get a loan on. The other will not be seasoned for 5 months.
So you can see how this can easily add up.
My agenda of this post is to not point a finger or even complain but to make BP newbies like myself aware. Hey, there are costs to loans, you can only get 75% back out, and this takes time...
Fortunately, Im a medical professional. I have some disposable income, but Im having a hard time seeing a light to the end of the tunnel.