How many has quit doing the BRRRR?

[Joe S.]

How many has quit doing the BRRRR?

With the hike in interest rates for  non-QM loan products it has definitely slowed  down this particular model for us personally. Has anyone found a workaround?

[Steven Goldman]

Hi Joe, while Elliot Elias's answer was short and sweet it was also spot on. I have been in real estate since 1981. There have been good and bad markets. The savvy investor continues despite the challenges in a bad interest rate or value market. It is all in the buying. You must be very discriminating and only buy devalued properties. You must strictly control your rehab. costs. You need to factor in a bigger spread between total acquisition and, rehab. costs and the ARV. That is where the buying comes in. You need the spread to buffer against rising costs of materials and interest rates.

Here s the good news. In a challenging market contractors and subs are willing to work at smaller profit margins to keep their crews busy. Homeowners are willing to accept less for their properties. Material costs will recede when demand falls off. It's all how you look at it. Our strongest investors are ramping up for the down market in anticipation of buying properties at lower values. They are refinancing and creating a cash fund to work from.

Finally, you may want to  only work in markets that you have experience or a strong connection with eliminating the possibility that you operate on faulty or old outdated information. If you are going to buy further from home, you need to have a strong team including a great real estate agent, crafty, experienced mortgage specialist and a thrifty property manager. The same ingredients that apply to a good market apply to a bad market. Happy hunting!