200K Cash, 1st time investing, BRRRR, what would you recommend?

[Farzad Nejad]

Hello everyone,

I have $200k cash and I would like to invest in a flip (BRRRR). My initial thoughts are to go to auctions, buy under max $75K in areas where rents are above $2K/mo for 2br 2ba. Then renovate, rent, refinance, repeat.

This will be my first investment property. I’ve managed multiple commercial and residential properties for a couple years and am ready to move forward in investing for myself. I have experience with renovating, renting, and managing. I’m also a licensed real estate agent.

Would anyone like to share their opinions of other options I should consider or would like to share their thoughts on the matter?

Any insights or advice would be much appreciated and helpful. Looking forward to hearing from you! -Farzad

[Will Fraser]

Hi @Farzad Nejad! I would recommend buying a house from a wholesaler or through an agent (from the MLS) before going to auction properties, especially early on. Zillow did an eye-opening study on auction properties (I believe their study was focused on sheriff sale properties) and found that since 2016 properties have been bought at auction at approximately a 7% discount compared to the market value. When considering the crazy-high risk and unpredictability of the auction process (because you infrequently are able to see the property beforetime, much less inspect it properly), a 7% discount doesn't really seem justified considering you can often find deals on the open market and through wholesalers at more than 10% off sticker price.

Good luck in the journey!

[Andrew Syrios]

Originally posted by @Farzad Nejad:

Hello everyone,

I have $200k cash and I would like to invest in a flip (BRRRR). My initial thoughts are to go to auctions, buy under max $75K in areas where rents are above $2K/mo for 2br 2ba. Then renovate, rent, refinance, repeat.

This will be my first investment property. I’ve managed multiple commercial and residential properties for a couple years and am ready to move forward in investing for myself. I have experience with renovating, renting, and managing. I’m also a licensed real estate agent.

Would anyone like to share their opinions of other options I should consider or would like to share their thoughts on the matter?

Any insights or advice would be much appreciated and helpful. Looking forward to hearing from you! -Farzad

I would be careful with auctions. Remember, in most counties at least, the property taxes are not wiped off at the foreclosure. You also usually can't get into them beforehand so it's hard to know exactly how much rehab there is to do. It may be best to market to out-of-state absentee owners, owners with dilipadiated properties or in foreclosure. Or look into what wholesalers and agents have to offer. But if you go this route, make sure to do your leg work and only buy if you believe there is a substantial cushion as it's likely to be worse than expected.

[Greg Dickerson]

Auctions are not a great strategy. Best  method is buying from wholesalers or to go direct to sellers.

You can purchase lists and compile lists from city and county for 60-90-120 days late on mortgage, pre-foreclosure, delinquent taxes, water cutoff, code violation, probate, divorce, high equity, etc. and mail or cold call.

Other methods are driving for dollars, door knocking, wholesalers, craigslist, Realtors, FSBO sites, expired listings, foreclosure sites, put out bandit signs, billboards, newspapers, other offline publications.

You can use pay per click/adwords, facebook, Linkedin, Youtube, and other forms of online and social media marketing.

[Farzad Nejad]

@Greg Dickerson, thank you for your suggestions!

[Farzad Nejad]

@Andrew Syrios, thanks for the heads up about the tax!

[Farzad Nejad]

@Will Fraser, thank you for the suggestions!