BRRRR scaling and velocity

3 Replies

Hi, I am new to investing and I have the following question...

I do understand the BRRRR strategy for both SFH and MFH and it seems that many investors prefer BRRRR route vs the buy and flip... However, it seems that the average cash flow for one door could range anywhere from $100/month to $400/month or even $500/month (probably rare)...one needs to scale up to 50-100 doors portfolio in order to have a pretty decent passive income...How did you do it? How hard was is it to scale? How long did it take to reach a pretty good size portfolio?

I am trying to get feedback and advice from experienced investors success stories (or failures...that might help too)

@Catalin B. , I'm a BRRRR guy with a handful of deals under my belt.

Buy and flip is a job. You are basically self employed and trading hours for dollars and missing out on many of the tax advantages of owning and holding real estate like depreciation. It isn't how much you MAKE each year that matters, its how much you KEEP after taxes that matters!

Your concern about scaling is valid though. You do need to get a good number of units. Similar to buy and flip this will be mostly about how you operate. If you manage other people to do the work you can most faster than being a DIYer.

If you get to several or 10 units, the cashflow will then generate enough for a downpayment on a rent ready property every several months or year. So, in addition to BRRRR your cash-flow can start growing your portfolio as well.

In the end when you want to cut back on working, your rental portfolio will keep generating income even if you hire a PM, but a buy and flip business stops when you stop working!

@Catalin B. - yes, it's not an overnight thing and your question is a good one. As an FYI, I'm starting with a clean slate and getting as much as I can from BP members so that I can go BRRRR. IMO, the one piece you might not be factoring in is equity. Let's create a simple example based on what you wrote. Imagine working up to 30 doors averaging $200/mo each. That's $6000/mo which in many areas is decent, yet not anything spectacular. What if each of those doors was worth $100k and you owed $60k? That's $1.2m in equity. You could let that ride and get more an more equity. But if cash flow is what you prefer, sell 10 doors and the profit will allow you to pay off 6. So now you'll own 14 homes bringing in $2800/mo and 6 owned outright. What do they bring in each? $1000? Now you're at $8800.

The best part though is that $500/mo is not rare. It's not the norm, but not rare. IMO, you should get $200/door or higher. So 30 doors should bring in $8-10k, not $6k. Either way, you'll be kicking butt.

Thanks for the replies...appreciated

Yes, building equity is the game here...SFH and small MFH are for the small fish...accumulate and scale

...larger multifamily (above 5 units) are tough to find, difficult to sell...it seems that big players are settling for lower CAP rates (even 4% CAP) and the competition to acquire them is fierce.