Long Distance BRRRR Advice

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Long Distance BRRRR Advice

Zach Wagner
Investor · CA · Member since 2020 · 14 posts · 11 votes

Hey there everyone! I'm a newbie to real estate investing and I have been stuck in analysis paralysis. I've been trying to gain as much knowledge as I can before pulling the trigger on a property. I live in CA and I'm looking to invest out of state. I was wondering if anyone knows of good cities to BRRRR in this current market. I'm looking for properties in the B or C class neighborhoods. Primarily single family homes (all in purchase + rehab around $100k). My main focus is cash flow but I would love for the property to appreciate over time as well. Thanks in advance, any advice or insight helps.

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Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
4y

@Zach Wagner as an investor who had to also invest out of state before (I used to live in NYC) I would highly suggest investing in a city that you have a network in.  Meaning, while I live in NYC I invested in Jacksonville, Florida.  Not because Jacksonville, Florida had the best returns but because I already knew a few people who could get me plugged in with other vendors, etc.  When you invest out of state you may never even see your property.  That's an immense amount of trust to put into someone.  So if you know some people in "City X"....but "City Y" has better returns - stay with "City X".  In the long run you will make more money with people who will take care of your assets.  I hope that makes sense. 

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    4y

    @Zach Wagner

    are you assuming you can borrow 100% of absolutely everything, or do you already have PMLs lined up?

    and just to make sure you understand how it works...

    if it doesn't appraise, you still have to pay your lender back.  appraisals are unpredictable... you can do everything right and still fall short.  and... that shortfall has to be covered... with CASH.  =-)

    0Reply
  • Quentin Jivery
    Member since 2022 · 92 posts · 11 votes
    4y
    Quote from @Joe Hammel:
    Quote from @Nicholas L.:

    @Joe Hammel

    just curious, how much are you spending on the rehabs and how much are you cashing out?

    It depends…just did one a deal that sat on the mls for 70 days and I bought it cash for $77k and didn’t do any repairs and my appraisal value was $102k so it was a near perfect brrrr with no work.

    otherwise, a traditional brrrr is $15-$25k+ rehab. 

    My biggest advice is don’t get stuck on a perfect brrrr. Find a property with sweat equity and follow the brrrr process. If you do this multiple times your ROI will be very high but it’s also a realistic, repeatable approach. 

     Are you doing BRRRS in your backyard as well as out of state? Where are you finding the houses that your investing in or better yet what tools are you using.

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  • Quentin Jivery
    Member since 2022 · 92 posts · 11 votes
    4y
    Quote from @Joe Hammel:

    @Zach Wagner

    Metro Detroit

    (my rental portfolio is here)

    Purchase: $80k-$130k

    Rent: $1200-$1500

    ROI: 10-14%

    Cash flow: $250-$350/door

    Appreciation: Double digit (for past 10 years, will gladly send data)

    Location: C+, B- (suburbs and certain markets)

    We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, mortgage, Amazon fulfillment, and more jobs.

    The bad reputation comes from OOS investors wanting $20k D market properties. We don’t buy those lol.

    I’d be interested to see more deals about Detroit, DM me?
    0Reply
  • Joe HammelBusiness Member
    Real Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
    4y

    @Quentin Jivery

    Yep, I live in metro detroit and invest all my money here. I feel like it’s the nations best kept secret. So many people afraid of the horror stories if oos investors buying $20k junk houses in detroit and getting burnt but stay away from that and buy in the better locations and they’re relatively easy to manage cash cows.

    Sounds good, I’ll send a PM

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  • Zach Wagner
    OP
    Investor · CA · Member since 2020 · 14 posts · 11 votes
    4y
    Quote from @Nicholas L.:

    @Zach Wagner

    are you assuming you can borrow 100% of absolutely everything, or do you already have PMLs lined up?

    and just to make sure you understand how it works...

    if it doesn't appraise, you still have to pay your lender back.  appraisals are unpredictable... you can do everything right and still fall short.  and... that shortfall has to be covered... with CASH.  =-)


    I already have private money lenders lined up. I fully understand that. And I'm ready to pay my private money lender the cash needed if the appraisal is low. However I know if I have a conservative ARV on the low side where the numbers still work, I'll be okay. I know if analyze the deal with a very high ARV expectation, it may come up short. Thank you for pointing that out though. That's definitely a very important detail that may help someone else on here out!

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  • David Erlich
    Property Manager · Marin County, CA · Member since 2020 · 6 posts · 7 votes
    4y

    @Andrew Postell this advice was great! I live in CA too and am looking to invest out of state as well. I have decided to invest in Texas because I used to live there and still have friends there. It will also give me more of a reason to visit. Thanks.

    1Reply
  • Todd Heitner
    Specialist · Huntingdon, PA · Member since 2014 · 160 posts · 59 votes
    4y
    Quote from @Zach Wagner:
    Quote from @Andrew Syrios:

    The best markets to BRRRR in are generally the midwest and southest (i.e. Oklahoma City, Kansas City, Des Moines, Birmingham, Memphis, etc.). The coasts are too expensive and the Rust Belt is pretty run down. But there are definitely still opportunities in the Rust Belt.

    Thank you, I have looked into a few of those. When you refer to the Rust Belt, what are you referring to? I have never heard that term.

    Indiana, Illinois, Michigan, Missouri, New York, Ohio, Pennsylvania, West Virginia, and Wisconsin are considered to be the Rust Belt states. These states were the manufacturing center of the U.S., employing a large part of the population in manufacturing jobs.



    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    4y
    Quote from @Zach Wagner:

    Hey there everyone! I'm a newbie to real estate investing and I have been stuck in analysis paralysis. I've been trying to gain as much knowledge as I can before pulling the trigger on a property. I live in CA and I'm looking to invest out of state. I was wondering if anyone knows of good cities to BRRRR in this current market. I'm looking for properties in the B or C class neighborhoods. Primarily single family homes (all in purchase + rehab around $100k). My main focus is cash flow but I would love for the property to appreciate over time as well. Thanks in advance, any advice or insight helps.


    Doing a first BRRRR local is tough enough that I highly recommend against the first being OOS. If you ignore that advice, I highly recommend it be somewhere that you already know people you can trust.

    My recommendation is you start with a house hack of a detached duplex. Live in your unit before renting the other unit. Live in the more thrashed unit and rent the better unit. Rehab the unit you live in, rent it at top of market price, move into the other unit and repeat. Refinance prior to moving out to get OO loan. Advantages: high LTV loan (FHA 96.5% LTV, other options as high as 95% LTV) results in optimal leverage, OO loan on initial loan and refi, do not need the trust and expense of OOS, less risk than OOS, because owner occupied duplex where your occupancy is before tenant the CA rent control does not apply (check for local rent control), you can do as much work yourself as you can to reduce costs, if you happen to decide to flip it versus BRRRR the gains are tax free by living there two years, Prop 13 results in no prop tax increase due to the sweat equity.

    After you have some experience, you will be better prepared to do an OOS BRRRR.

    Good luck

    2Reply
  • Jared HottleBusiness Member
    Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
    4y

    Midwest is going to have this. We have some in Northeast Iowa. Cashflow will be great. appreciation will be less but some even reach the 2% rule.

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  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    4y

    @Zach Wagner I would start with areas you know. Understand that if you're looking for cash flow you'll be in C neighborhoods and capex/maintenance will be higher. The numbers look much better on paper than in real life.

    If you buy in B class areas you probably won't have much, if any cashflow but the properties will appreciate better.

    A lot of the appreciation we've had in C class areas these last few years was fueled by inflation and low rates IMO so I don't expect natural appreciation in those areas to continue as quickly as it has, but you can always force some.

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  • Charisma Machado
    Investor · San Antonio, TX · Member since 2022 · 6 posts · 3 votes
    4y

    Check out the real estate market in San Antonio, TX. before the interest rates continue to climb. I'm a new real estate investor and finding really great deals out here and just put a down payment on my first investment property. Single family home in a growing subdivision. Google search San Antonio real estate market. Everything you read will tell you it's a good time to invest here. Far West side, South side, Southtown, and there are nice, older neighborhoods with good Fix and Flip opportunities. Affordable and in areas where home values continue to go up. My house has increased in value by $100k every year for the past 2 years, as an example, out here in the Far West side. 

    1Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Todd Heitner:
    Quote from @Zach Wagner:
    Quote from @Andrew Syrios:

    The best markets to BRRRR in are generally the midwest and southest (i.e. Oklahoma City, Kansas City, Des Moines, Birmingham, Memphis, etc.). The coasts are too expensive and the Rust Belt is pretty run down. But there are definitely still opportunities in the Rust Belt.

    Thank you, I have looked into a few of those. When you refer to the Rust Belt, what are you referring to? I have never heard that term.

    Indiana, Illinois, Michigan, Missouri, New York, Ohio, Pennsylvania, West Virginia, and Wisconsin are considered to be the Rust Belt states. These states were the manufacturing center of the U.S., employing a large part of the population in manufacturing jobs.




    With big businesses being in Ohio such as Intel, Amazon, Chipotle, the Limited, to just name a few. We have seen people flooding here. I think now is a perfect time to invest here and I help multiple clients every week get slam dunk deals.I recommend the major cities in Ohio:

    -Columbus, great for appreciation, pp is a bit higher around $220k for multifamily https://learn.roofstock.com/bl...

    -Cincinnati, has a mix of cash flow and appreciation, average multifamily around $180k. https://www.noradarealestate.c...

    -Cleveland, has a lot of cashflow potential, average multiform around $140k. https://learn.roofstock.com/bl...

    There are other smaller markets like Dayton, Akron, and and Newark, which we are starting to see these areas boom due to huge investors and corporations like Intel choosing to set up shop in these kind of areas.

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    4y
    Quote from @Zach Wagner:

    Hey there everyone! I'm a newbie to real estate investing and I have been stuck in analysis paralysis. I've been trying to gain as much knowledge as I can before pulling the trigger on a property. I live in CA and I'm looking to invest out of state. I was wondering if anyone knows of good cities to BRRRR in this current market. I'm looking for properties in the B or C class neighborhoods. Primarily single family homes (all in purchase + rehab around $100k). My main focus is cash flow but I would love for the property to appreciate over time as well. Thanks in advance, any advice or insight helps.


    It does not matter where you start as long as you develop your Core 4. The core 4 is David Greene’s long-distance investing strategy and consists of a realtor, contractor, property manager, and lender. Once you have this team in place, you should be able to invest in any market confidently.

    As for picking a specific market - I would go after one with an increasing job and population growth. I invest and work in Columbus, Ohio. I am also looking to invest in Cincinnati and Cleveland.
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  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    4y

    @Zach Wagner

    I recommend you consider Dallas, TX!

    The cash-on-cash return and appreciation are steady.

    You should select a market that will meet your investment goals.

    While there are numerous benefits to long distance real estate investing, there are some potential drawbacks as well. Here are some of the most common mistakes that long distance real estate investors make:

    1. Choosing a market for the wrong reasons

    Instead of selecting a market for objective reasons like a strong economy and job market, investors select a city for subjective reasons such as the area being a popular spot for family vacations.

    2. Accepting mediocre returns

    Sometimes investors try to rationalize paying more for a property because it’s turnkey and already has tenants. Money is made in real estate investing by buying at the right price in order to maximize returns. If the returns don’t measure up, simply move on to another rental property where the numbers make sense.

    3. Depending on family members

    Choosing a long distance market to invest in solely because a family member lives there is another common mistake.

    Long distance investors hope that relatives will become tenants to keep vacancy low or handle any property management issues that come up to reduce operating expenses. By factoring in a “family discount,” owners create unrealistic financial projections for their long distance real estate investment.

    Good Luck!

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    4y

    @Jordan Moorhead

    @Dan H.

    thanks - 100 likes.  i feel like this was one of those "forest for the trees" posts.

    1Reply
  • John WilliamsBusiness Member
    Property Manager · Clarksville, TN · Member since 2018 · 443 posts · 210 votes
    4y
    Quote from @Zach Wagner:
    Quote from @John Williams:
    Quote from @Zach Wagner:

    Hey there everyone! I'm a newbie to real estate investing and I have been stuck in analysis paralysis. I've been trying to gain as much knowledge as I can before pulling the trigger on a property. I live in CA and I'm looking to invest out of state. I was wondering if anyone knows of good cities to BRRRR in this current market. I'm looking for properties in the B or C class neighborhoods. Primarily single family homes (all in purchase + rehab around $100k). My main focus is cash flow but I would love for the property to appreciate over time as well. Thanks in advance, any advice or insight helps.


     Make sure you check out Clarksville, TN (where cash flow meets appreciation!) We've got a very attractive market, particularly for out of state investors


     Thank you, I will give it a look! If it fits my needs I will be coming to you for some property management questions and maybe we can team up.


     That would be awesome! Feel free to give me a call any time, I'd love to share with you more about what our market has to offer!

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  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    4y

    @Nicholas L. this is one of the posts where every Realtor in the country jumps in and says "my market is the best and the only place you can achieve these results!" lol

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  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    4y

    Check out my article about the Cons of BRRR.

    https://www.biggerpockets.com/... this is coming from an Accredited investors POV who used to do turnkey rentals.

    I personally would not do Remote BRRR as there is just a lot of risk with 1) risk of embezzlement with contractors 2) change orders and 3) bank doing bait and switch doing a lower appraisal and/or LTV on the refinance.

    This is especially true for high paid professionals or those with a net worth of over $300,000.

    0Reply
  • Olivia De Oliveira
    Realtor · Memphis, TN · Member since 2018 · 8 posts · 3 votes
    4y

    Memphis is a fantastic market for what you're looking to do.

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  • Dean HarrisBusiness Member
    Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
    4y

    I have BRRRR'd my last 36 SF purchases in Memphis. If you have the team you can trust, this way of buying gives you the knowledge about the house that you might not have if you buy a TK or even just a nice home that is occupied and cash flowing. The rehab allows you way more intel and what to expect n the future. Its also scalable and with the right banking partners, there is no seasoning period at all.

    Trust in your team is the key. Trust and then you verify!

    Good Luck!

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