Brrrr method with new construction?

Question

Does the BRRRR method work with new construction? seems like an obvious yes but can i get some feedback about new construction as opposed to buying something already in existence.

Jack Mawer · Answer

I would recommend gaining some experience before you attempt to do a BRRRR with new construction. There is much more risk and moving parts that go into new construction rather than just buying a distressed property and fixing it up. In addition, if you are looking for hard money it will be difficult to get a loan for new construction without prior experience. I would start with a buy/hold property or a fix/flip and work your way up to new construction.

Mike Dymski · Answer

Sure, if you're the builder.

Michael Dumler · Answer

@Nathan Leger, I'm not in the new construction space, but a BRRRR new build does not seem to make much sense unless the contractor acquires the land, labor, and material below market value. AKA there are way more variables to account for than a traditional BRRRR. Very rarely would a builder be able to pull all of their money out from the end project. This is why new builds are often sold to other investors or home buyers. Buying something already in existence provides a little more opportunity and less hassle than a new build. Curious to hear others' thoughts and experiences.

Adrian Lemus · Answer

As an investor and a contractor I say no one here has really looked into numbers, short and long run. I work with investors and always recommend New Constructions, reason being it’s a lot smoother and better at the long run for your pockets for Resale or renting.

I could flip a house for you but I can’t guarantee anything wont go wrong because you never know the history of the house which at the end it’ll cost you more. I usually charge between $40-50 a sqft for a complete rehab and this will usually take about 6-8 months to get done.

New construction homes I can guarantee that you will have ALOT less problems than a Fix and Flip and you will be spending just as much or less then rehabbing a home in short and long term! What I charge my investors is “Cost plus 25%” and I always put a 10 year warranty on structural.

Also my New Construction Homes do not take 18-24 months! Once permits approved I usually take 3-5 months to complete a build and down here you can make 15-20% more than selling a rehab.

Nathan Leger · Answer

this is my intent. I found 3 acres of land that was improved with a 2 car garage. I’m converting the garage (720 square feet) into an ADU, and building a 2-family adjacent to it .

Andrew Syrios · Answer

Build to rent was a great way to go for a while, especially if you could find cheap land in good areas. In some cases, I think you could probably BRRRR out of it, but in this higher interest rate environment, BRRRRing a build to rent would be very difficult indeed.

Justin Fox · Answer

@Nathan Leger

If you get the land cheap, don't pay for money and like @Mike Dymski said, if you're the builder you can make lots of money.

As soon as you buy a Lot at market price from a realtor, borrow money for the build and hire a contractor, you've lost.

Kenneth Garrett · Answer

@Nathan Leger

New construction is not really a BRRRR.  You’re just buying a rental property.  In general, a BRRRR is forcing equity through the rehab.  That doesn’t really happen in new construction.  Most new construction is cost prohibitive as a rental.  The construction cost are just to high, unless you’re getting a smoking deal.

Robert Ellis · Answer

Have you looked at doing build to rent in at any particular markets? columbus is one that still has land and growth trends that make the numbers work. I'd be interested into lying further.

Andrew Syrios · Answer

I think that has potential (although you will definitely want to check the numbers carefully). Building duplexes (especially with an extra ADU) is going to have a lot more cash flow potential in this interest rate environment than SFR.

Brrrr method with new construction?

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