Let's Network! (Intro)

[Daniel DaSilva]

Hey Everyone! NJ resident here investing in PA, and possibly soon in NJ. I have 3 other partners that I own a RE investment business with. We recently cash-out refinanced our most valuable property, out of a total of 2, and are looking to scale our business faster then we have been. We manage our own properties (for now) so we can maximize cashflow and have developed a pretty decent system of operations. 

New here and really just looking to meet people and hopefully network with fellow investors and wholesaler/agents to help us find some great deals and scale up our portfolio. Our strategy in focus now is BRRRR after using the sluggish buy & hold strategy. I'm very ambitious and would love to scale using the BRRRR or other strats that allow it, my partners are more traditional and prefer the buy & hold with tenants already placed. I've been trying to bring them over to BRRRR for some time so any help is appreciated to convince them this is the way!!

I do also plan to go at it alone in the next few years and so would love to network for that not so distant future too! Feel free to ask me any questions or introduce yourself. Would love to get to know you!

[Clayton Silva]

Hey Daniel, you Portuguese or Brazilian?  (I have a lot of relatives named Daniel Silva lol).

Not to copy and paste an answer from another forum, but it seems to be pretty applicable to what you are asking here. This is my personal take on BRRRR strategy in this market:

I don't do BRRRRs personally, but I work with a lot of investors who do as their lender. I will say, I have not seen a perfect BRRRR in a number of years for a few reasons. (Perfect BRRRR meaning they paid off their loan AND recouped ALL of the capital they put into the project via a cashout).

1) Cashout rules have changed to hedge for risk on almost every loan product. In 2021 and 2022, you could cash out a property pretty quickly and conventional loans were at 6 months if there was debt on the property. That changed when conventional loans required a mandatory 12 month seasoning of the prior lien and forced a lot of BRRRR investors to hold onto high-interest rate hard money longer (conventional loan changed in Apr of 2023). DSCR loans are often 6-month minimums as well with few exceptions as well so investors are not able to recycle capital as quickly as they would always like to.

2) Home values and rates have both climbed faster than rents. The other limiting factors I see are restrictions on cashout refinances on vacant properties and rents not being high enough to support the new debt so the cashout LTVs are often lower than what the investor was looking for.

3) Tax, insurance, labor, and construction costs have all risen as well which further compresses margin.

Summary: most "BRRRRs" I see these days are lucky to get enough equity, enough rent, and what not to pay off their hard money and maybe pull a small amount of the personal capital out of the deal. The investors usually have a lot of equity left to tap into, but the rate on the debt often prevents them from being able to tap into more equity. It definitely slows down the velocity of money and scaling but can still be a good strategy if cards are played well, and a longer time horizon is considered. Hope this helps!