No success with BRRRRing

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No success with BRRRRing

Katrina B.
Member since 2021 · 25 posts · 13 votes

DALLAS BIGGER POCKETERS - 

New investor here 👋🏽...I'd like to hear experiences from those that have built their portfolios the traditional way - finding a good deal, putting the required 15-20% down and renting it. I've had no success in finding good BRRRRdeals or flips as most experienced investors have gotten first dibs. Although it will take a longer time to build my portfolio this way, I'm fine with going this route for my first few properties.  Dallas market is tough! 

I read a post yesterday where a lady indicated that was her process because of the competition in her city. People on the post frowned upon it because “it would take years” to recoup her down payment. I understand the trend now is BRRRRs and not paying your own money but that may be the only way to get some skin in the game.

Please share your experiences of going this way. How long did it take to build your portfolio and how long did it take to gain profit?

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Julie Sisnroy
Realtor · Papillion, NE · Member since 2013 · 134 posts · 59 votes
5y

I will jump in here as a 14 year part-time, buy and hold, slow and steady investor with a full-time job and a family.  I am by no means an EXPERT In real estate, but I have made some observations over the years. There are 10 different ways to invest in real estate and 100 pros/cons for each and 1,000 opinions on all of it.  At the end of the day it is a balance between low risk/high risk and time/money.  The only true  "bad" investment is one where you lose value, whether that is time or money is up to you.  

I have learned with most investments/projects (or just life in general) you either have time or money, rarely both for most of us. So are you willing to trade time for money? BRRRR/flips/rehabs. Is your time more valuable? Turn-key. Each one of these can be good/bad and what is MOST important is having the right team in place. And the end of the day, YOU decide what numbers work for you. If you are interested in more of the transactional type deal and market at hand (day trader), appreciation may not be a factor. But if you are interested in a long-term strategic approach, A/B nice area, cash flow may not be the best, but you will have appreciation. Can be hard, but not impossible, to find both.

Some people say leasing a car is a waste of money, some saying going out to eat vs. cooking is a waste of money, and some say turnkey is a waste of money, but if it aligns with YOUR lifestyle/family/career/finances/risk-aversion, don't worry about the naysayers. There are a TON of A-type personalities here-it comes with an entrepreneurial mindset, so you won't find a lack of opinions. You just have to sit down and look at your goals and how much participation you want in the REI world. Overall, it is a good place to be.

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  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    5y

    Hi @Katrina B.

    We started out older, with money saved and not much w-2 income so we do commercial loans with 25% down. We are buy and hold investors. Refinancing isn't our goal-- though we have been able to cross collateralize properties that have appreciated as down payment for subsequent purchases. We do generally buy "value-add" properties planning to rehab units at the first turn-over and get rents up. We started out 4.5 years ago and now have 59 units. 5 are still units are still under renovation. Home Depot has financed much of our renovation work. I guess we do partial BRRR we buy-rehab-rent-repeat. We don't buy buildings unless they cash-flow at purchase at least $100/door and we expect to get that number up quickly with our renovations.

    15Reply
  • Arsen Atanasovski
    Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes
    5y

    @Katrina B. you can do it the slow way, no one should tell you it's bad or good. It's only a slower process then BRRRR. I've done it the slow way for years. The only way you can do BRRRRS and I rarely hear this on the podcast is to be known to the wholesaler. Example you go to your daily coffee shop, after sometime the person knows you and finally you don't even have to say your order they know what you want. A BRRRR deal will only work great with no money from your pocket if you buy it at least 55% ARV, don't forget what I said at LEAST 55%. Will you ever find one that discounted? maybe depends how motivated you are. It sounds like you have a full time job "like me" and you do not want to waste your time or invest time into finding deals that would BRRRR and that's fine you can go the other route. But your mentioning BRRRR so I would like to touch on that. If you listen to the podcasts ever investor at some point just starts marketing on their own to find deals. You might want to go down that road. Another way is to help the wholesaler out, I have a few wholesalers here in Michigan and I try to help them with their deals in return they offer the deal first to me before they blast it to their buyers knowing that I'm not a big time buyer but a support line they need and in return send awesome deals. I am a real estate agent, when a wholesaler is looking to make a deal they come to me for genuine comps and in return offer me the deal first. The other way is where I have heard in a couple podcasts, is to be the big timer, every deal the wholesaler brings your buying them no matter what, this is where I think your stick at, you would find a deal and it's gone because the big time guy already had days to review and offer and the wholesaler already knows that the big time guy will buy it, just as a back up the wholesaler will list it for back up offers just in case the big timer changes their plan on the deal. This is common sense in every business out there, to go to Sam's Club you need a membership card. To work at corporate America (I call it membership card) the world calls it a bachelor degree. I was in the same spot realizing this guy doesn't have a clue but he is working at GM? This was a time I did not have my degree yet. My suggestion would be to not buy a retail your cashflow will not be great, and you will not have a great experience with RE, try to find value add properties. And to tell you the truth I'm looking at properties in Texas they have great properties that cashflow and a lot of good wholesalers.

    2Reply
  • Katrina B.
    OP
    Member since 2021 · 25 posts · 13 votes
    5y

    @Jill F. Hi there! Thanks for taking the time to respond.

    0Reply
  • Katrina B.
    OP
    Member since 2021 · 25 posts · 13 votes
    5y

    @Arsen Atanasovski Hi Arsen. I’ve started to look in other areas. I think I will begin that route. As you mentioned above, once I build my network, it’ll be easier. How do I find wholesalers in Louisiana and Texas?

    0Reply
  • Joe Norman
    Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
    5y

    My guess is that your ability to BRRRR is going to be heavily dependent on the market in which you are investing. Here in Baltimore BRRRR deals are a dime a dozen, even on the MLS (inventory definitely gets tighter in the more desirable neighborhoods though). I don't know the first thing about the Dallas market but I would imagine that you may find inventory limitations there.

    Out of market investing, especially the BRRRR route, is very risky for a first time investor. Given your market and experience limitations, I would say going the "traditional" 25% down route on a turn-key property is a great way to get started.

    Good luck!

    0Reply
  • Brian Scott
    Investor · Fort Worth, TX · Member since 2018 · 18 posts · 17 votes
    5y

    hey Katrina I'm in your shoes now just starting in Dallas. Competition is fierce for BRRRRs and "slow" route deals both on and off market from what I'm seeing. Prices are getting driven up from retail buyers and wannabe investors so it might be wise to be open to both types of deals if the numbers work. The limiting factor here is finding the deal not financing. As far as lead source I've had good response rate driving for dollars in my target neighborhoods and texting the owners. Just started last week but one owner considered an offer on the spot. Financing the deals isn't an issue for the buy, rehab, or refinance since there are tons of lenders here. Just my .02.

    3Reply
  • Joshua Baldovino
    Rental Property Investor · San Jose, CA · Member since 2020 · 15 posts · 15 votes
    5y

    How are you planning on funding the deal? A lot of BRRRR properties won't meet the criteria for traditional financing or won't appraise for the value you need.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    Here's the house below 70% ARV in Dallas that you can do BRRR/flip immediately:



    2318 Poplar Street Dallas, TX 75215

    2Reply
  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    5y

    @Katrina Bledsoe consider investing in Vacation Rentals if you are willing to launch an active biz, just need some time freedom to put out the occasional fire. In the right market you can but a FMV off the MLS, self manage (even remotely) and do well. Good luck!

    0Reply
  • Courtney M.
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y

    @Katrina B.

    The reason many investors focus on BRRRR is because of the ability to "recycle" your investment dollars.

    I purchased my first property with 15% down in SE Michigan. All in it was about $25k ($87,000 SFH). That property is doing fine. However, once I went through this process once I realized it was going to take me a long time to build my portfolio.

    I just wrapped up a BRRRR which I purchased with cash. I had about $25k cash of my own and took out $90k in short-term loans. The property was $84k and just appraised at $140k. Using cash-out refi, I received $98k back (after closing costs, those can be a significant chunk) and was able to pay back my short-term loans and had $14k left. So although I didn't get ALL my cash out, I have 30% equity in the property, a low payment due to current mortgage rates, and since the property is fully fixed up, I will have fewer repair expenses.

    In both processes, I figure, I am out cash either way. But I will get back more of my cash and be able to pursue more investments, more quickly, using the BRRRR method.

    7Reply
  • Katrina B.
    OP
    Member since 2021 · 25 posts · 13 votes
    5y

    @Brian Gerlach That’s definitely an option. Thanks for the suggestion.

    0Reply
  • Katrina B.
    OP
    Member since 2021 · 25 posts · 13 votes
    5y

    @Carlos Ptriawan How would you know without assessing repairs and renovations?

    0Reply
  • Katrina B.
    OP
    Member since 2021 · 25 posts · 13 votes
    5y

    @Courtney M. Thanks and congrats! I would love to utilize the BRRRRR strategy, just gotta find a good property.

    Question about your hard money loan and appraisal process...

    1. How long did it take for renovation - to get the house back on the market? Another concern I have is the amount of time I’ll be paying interest on a hard money loan.

    2. Were you worried about the appraisal coming back at an amount that wasn’t enough to cover the hard money loan? What was your exit strategy?

    1Reply
  • Courtney M.
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y

    @Katrina B.

    The first key is to work with an experienced investment broker. My broker estimated that the property would be worth $135 - $140k after rehab and he was spot on.

    I purchased the home in late March 2020. One of my loans was from a company called Lightstream - an online loan company that offers large unsecured loans. I applied for $100k and got approved for $65k. My payments for that loan were $613.52/month.

    The second loan was a $25,000 private loan for which I paid 10% interest-only based on a yearly calendar plus a 2% loan fee. So $500 for the loan plus monthly payments of $208.33.

    Construction started in April 2020 and was finished by mid-May. We had a tenant in paying $1,350/month starting in June. My PM takes the first months' rent as part of his fee, so starting in July I had income from the property that could be used against those payments.

    I was worried about this property because the offer was accepted at the end of February 2020 and in March things started to go crazy with COVID. I almost backed out of the deal, but I had $8k in as earnest money and I would have lost it. Also, in talking with my broker, he said I stood to lose more money by backing out, which helped to put the situation in perspective. 

    Even if the property hadn't appraised as high as it did, I still would have been able to refinance and it pay back my loans, I just wouldn't have received my own investment back. 

    Also, if the market dropped, I could have just kept paying on those loans and waited for the market to pick up. That's probably my favorite part about BRRRR - as long as you buy right, there are multiple exit strategies.

    I hope that helps!

    5Reply
  • Katrina B.
    OP
    Member since 2021 · 25 posts · 13 votes
    5y

    @Courtney M. Thank you so much! This detailed explanation will take me a long way. :-) I may try to work with your hard money lender.

    0Reply
  • Katrina B.
    OP
    Member since 2021 · 25 posts · 13 votes
    5y

    @Joe Norman I’ve heard horror stories about turn-key properties.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    You compare the PSF with the recent flipped home in that neighborhood as general screening.

    0Reply
  • Andrew Bang
    Lender · Texas; Arizona · Member since 2019 · 276 posts · 282 votes
    5y

    Katrina, DFW is a great place for the BRRRR strategy! I work with a number of investors that are focusing in DFW. There are still deals in Dallas, and if you venture over to Grand Prairie, Arlington, and Fort Worth, even more deals because of the lower price points. There are alot of wholesalers in Dallas that put out multiple properties a week, sometimes each day. Connect with them, get on their lists and start looking at the properties and running your numbers to see if they work. If you need help finding them, send me a message and I can send you a list of the wholesalers I've worked with that have properties with value.

    5Reply
  • Stephen C Gates
    Rental Property Investor · Canfield, OH · Member since 2018 · 15 posts · 4 votes
    5y

    @Jill F. Why don’t you refinance after the units are fixed up? Seems you may be missing out on lower rates and higher cash flow. Am I missing something?

    0Reply
  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    5y

    Closing costs on commercial loans to an LLC are not insignificant, re-fi appraisals are always a risk and at this point it hasn't seemed likely to be a big enough benefit to make it worth while. Once we've held things for a bit longer and when we're closer to where we want to be, we'll probably make the effort to look into our re-fi options.

    1Reply
  • Allen L.
    Rental Property Investor · Chicago and mainly invests in KS remotely · Member since 2018 · 360 posts · 314 votes
    5y

    What's hard is finding a team that would source deals, put together bids, and do honest work for a good price. It sounds like you're stuck on #1, I think you should sign up for some Dallas wholesalers emailing list (these guys will sometimes sell/give your contact to other wholesalers) which kinda works out. I have so many wholesalers sending me stuff and I probably only actually signed up for 2. Once you have leads, then figure out whether you can put together the rest of your team to help you do the hard work. The pain is always in the beginning, once you get the ball rolling and perhaps even mess up the initial 1-2 BRRRR it'll be a worthy investment. Just make sure you have enough cash for some fudges.

    5Reply
  • Onan Dumas
    Investor · Rowlett, TX · Member since 2013 · 132 posts · 72 votes
    5y

    @Brian Gerlach

    I second this.

    0Reply
  • Julie Sisnroy
    Realtor · Papillion, NE · Member since 2013 · 134 posts · 59 votes
    5y

    I will jump in here as a 14 year part-time, buy and hold, slow and steady investor with a full-time job and a family.  I am by no means an EXPERT In real estate, but I have made some observations over the years. There are 10 different ways to invest in real estate and 100 pros/cons for each and 1,000 opinions on all of it.  At the end of the day it is a balance between low risk/high risk and time/money.  The only true  "bad" investment is one where you lose value, whether that is time or money is up to you.  

    I have learned with most investments/projects (or just life in general) you either have time or money, rarely both for most of us. So are you willing to trade time for money? BRRRR/flips/rehabs. Is your time more valuable? Turn-key. Each one of these can be good/bad and what is MOST important is having the right team in place. And the end of the day, YOU decide what numbers work for you. If you are interested in more of the transactional type deal and market at hand (day trader), appreciation may not be a factor. But if you are interested in a long-term strategic approach, A/B nice area, cash flow may not be the best, but you will have appreciation. Can be hard, but not impossible, to find both.

    Some people say leasing a car is a waste of money, some saying going out to eat vs. cooking is a waste of money, and some say turnkey is a waste of money, but if it aligns with YOUR lifestyle/family/career/finances/risk-aversion, don't worry about the naysayers. There are a TON of A-type personalities here-it comes with an entrepreneurial mindset, so you won't find a lack of opinions. You just have to sit down and look at your goals and how much participation you want in the REI world. Overall, it is a good place to be.

    17Reply
  • Katrina B.
    OP
    Member since 2021 · 25 posts · 13 votes
    5y

    @Julie Sisnroy What a great post! I appreciate your feedback. And you’re right - this isn’t a one size fits all. I just have to find my “size”. LOL!

    0Reply
  • Courtney M.
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y

    @Jill F.

    I feel like both taxes and closing costs don't get mentioned enough here. I'm looking at refinancing a property now, I could get about $15k cash out but the closing costs are $5k! So it doesn't seem worth it to me unless I can pull out at least $20k, net of closing costs.

    1Reply
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