We've had rentals now for 3 years, but I didn't think the BRRR strategy was for us until this year. We decided to give it a go, and since the biggest pain in the butt of a refi is all the paperwork, we decided to do 4 houses at once since the paperwork would be the same for 4 as for 1.
1st one. A little 3 bedroom 1 bath, we paid 63k for put 12.6k down, spent about 3k on rehab. Appraised at 86k. Borrowed 64.5k, got 11k back in cash, almost our entire investment.
2nd one. A nice 2 bedroom 1 bath we paid 46k for. Put 9k down, put about 8k into it. Appraised at 85k. Borrowed 63k. put 25k in our pockets. That's all of our investment plus about 18k.
3rd one. A 3 bedroom, 1 bath we paid 70k for and put about 5k into. We put 14k down. Appraised at 130k. borrowed 97k put 40k in our pockets, all of our initial investment plus about 23k.
Last one.. The first 2 homes we bought as rentals, we bought them as a package and only had one mortgage for the 2 of them. We paid 86k for the 2 of them. Did a lot of work to one. We had 13k down and about 10k in rehab. The one we refi'd appraised at 123k. Borrowed 92.5k. Paid off the note, put 26k in our pockets and the second house is now free and clear.
So, we got all of our money back, plus about 44k, and instead of 5 houses mortgaged, we only have 4, and another one we can do some financial maneuvers with in the future.
edit.. Almost forgot to mention, our payments went down by about 60 bucks a month.
Sounds like you made some really good investments Rodger. Just have a couple of questions if you dont mind me asking. How were you able to build up the amount of cash in order to put down on all 4 houses? Was it saved from the rentals you already own? Did you take a heloc out on them? Do you plan on continuing to use the BRRRR strategy?
Interesting. I think what you are doing is a modified BRRRRR strategy actually. Normally a BRRRRR is purchased with cash, then refinanced on the back end to get your cash back out to yo-yo into the next deal. Most I did was 5 in one run.
It sounds like you are financing them and then refinancing them which is not actually but a BRRRRR but it is similar. Many people get that confused due to not being able to come up with the cash and don't even consider it an option, but it really is. We started with financing and refinancing. now we buy cash. MUCH better. can buy homes that cannot be financed normally. tarped roofs are gold mines!!! Just bought one for 40K put 12K into it. appraised at 100K. borrowed 75K against it and it rents for 900/mo.
save up the cash and try it. bought one on cell phone using verisign. No need to show up at title company because there is no note to sign. As is where is, call me and it's gone. Done deal.
That is the advantage of a true BRRRRR transaction. It's free and clear. Just call up your banker when it is rehabbed and rented and they will do the rest.
Let me know how you like it.
Homes in the Hood
We did just that, with the 100k+ we just got, we were able to put an all cash offer on another rental. This house had 14 offers in the first 24 hours, but our cash offer beat out a slightly higher offer that would have needed financing and the buyer knew the house wouldn't pass FHA. I'm going to have it leveled, do some minor remodeling and then pull all my cash out again.
Outstanding! Keep up that routine again and again. In a few short years (goes by fast when working hard), you will be able to give your boss notice.
Best of luck!!!