Real Estate Agent · Philadelphia · Member since 2022 · 74 posts · 33 votes
Recently i have had a lot of investors trying to flip and BRRR at the same time. If theres a property where you can renovate, make large capital, and cashflow thats the unicorn we are all shooting for.
Most of the time if you do high end finishes like a flip, you will appraise extremely high, and you get capital back. But the downside is you will have a higher mortgage payment which will kill your cashflow.
For some reason a lot of people seem to think they will get both, and they are finding themselves in analysis paralysis waiting for the unicorn.
You go through the same steps with a BRRRR as you do with a flip. The difference is selling versus refinancing.
There's a point I'd like to make here: you do not go through "the same steps" with a BRRRR as you do with a flip. The nature of a BRRRR renovation and a flip renovation are usually significantly different things. Glossing over that difference injects a lot of misunderstanding and silliness in the process.
A flip renovation focuses on getting high-end finishes and touches into a project. Whether or not the finishes and touches actually last past perhaps six months, a year of use is of far less concern than what you do with a BRRRR renovation, because with the BRRRR, the house is going to stay in your portfolio. So conversely with a BRRRR renovation, the renovator needs to focus on the long-term health and low ongoing maintenance of the property, versus the gold-finish faucets and heated bathroom floor in front of the vanity. Less emphasis is put on those features that impress a retail buyer who is easily wowed by vanity touches: the coffee islands, the gas fireplace insets, the hot tub in a cramped bathroom that looks good but that chops off the leg room for the toilet. More emphasis is put on making sure the sewer connection is rock-solid, the window seals are intact, the water heater is properly sized for the family that is expected to occupy the property.
Lender · Rosenberg, TX · Member since 2022 · 286 posts · 130 votes
3y
@Faith Importico why not? both strategies have income production. Obviously it makes sense to keep a property that has a high DSCR. It all matters on what you can afford, and your strategies. IF you wanted you could also throw $ into a syndication... you can do many things
You go through the same steps with a BRRRR as you do with a flip. The difference is selling versus refinancing.
There's a point I'd like to make here: you do not go through "the same steps" with a BRRRR as you do with a flip. The nature of a BRRRR renovation and a flip renovation are usually significantly different things. Glossing over that difference injects a lot of misunderstanding and silliness in the process.
A flip renovation focuses on getting high-end finishes and touches into a project. Whether or not the finishes and touches actually last past perhaps six months, a year of use is of far less concern than what you do with a BRRRR renovation, because with the BRRRR, the house is going to stay in your portfolio. So conversely with a BRRRR renovation, the renovator needs to focus on the long-term health and low ongoing maintenance of the property, versus the gold-finish faucets and heated bathroom floor in front of the vanity. Less emphasis is put on those features that impress a retail buyer who is easily wowed by vanity touches: the coffee islands, the gas fireplace insets, the hot tub in a cramped bathroom that looks good but that chops off the leg room for the toilet. More emphasis is put on making sure the sewer connection is rock-solid, the window seals are intact, the water heater is properly sized for the family that is expected to occupy the property.
Columbus, OH · Member since 2023 · 427 posts · 254 votes
3y
A BRRRR and a Flip have a lot of the same processes, the difference is refinancing and holding vs selling. In theory, you'd be doing all the same leg work up to a refi. At that point, consider how your new appraisal will impact your monthly mortgage payment, and how your NOI covers that debt service. If a new mortgage kills your CFs, consider selling.
It's going to depend on the property and your appraisal as well as what your goals are. As many others have said, a lot of the steps between a flip and a BRRRR are very similar up to the point where you need to decide whether to sell or refinance. If you receive a favorable appraisal and you can refinance into a new mortgage while still retaining a high enough cash flow to keep you happy then a BRRR is the strategy to lean towards. If cash flow would go negative following a refinance then it will be up to you to decide whether or not you want to keep the property and accept a negative cash that you will need to supplement in the short term because your goal is long term appreciation in the area or whether you would rather regain your capital and take the immediate profits in order to put into another property. Everything will really come down to your goals, the individual property, and the options available at the time.