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BRRRR - Buy, Rehab, Rent, Refinance, Repeat

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Turn key versus BRRRR

Posted Apr 27 2023, 08:02

Hi everyone,

I have a hypothetical for you and I am new here so I am sure this topic has been previously discussed somewhere in the depths of these forums so forgive me for just outright asking and not diving into that but I would love to know Pros/Cons to the following scenario. Say you have $900k to invest would you prefer .....

A) Invest in x3 $300k houses that are turn key ready to rent (have already been nicely Reno'd so no capital expenditures needed in near future) and are in desirable locations so that the property will appreciate more over time

B) Invest in x4-5 $150-250k houses in less desirable areas that are also turnkey

C) Same as B but need to be rehabbed 

I ran some quick calculations and it looks like the cash on cash and annual ROI are better in scenario A with some decent cash flow as well, and in my opinion less headache of rehab and just simpler in terms of management since there are less properties and little to do other than regular maintenance for the near future. Am I wrong about this? Am I not considering something? Thanks!

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Teesh L.
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Replied Apr 27 2023, 08:13
Quote from @Caroline Landreth:

Hi everyone,

I have a hypothetical for you and I am new here so I am sure this topic has been previously discussed somewhere in the depths of these forums so forgive me for just outright asking and not diving into that but I would love to know Pros/Cons to the following scenario. Say you have $900k to invest would you prefer .....

A) Invest in x3 $300k houses that are turn key ready to rent (have already been nicely Reno'd so no capital expenditures needed in near future) and are in desirable locations so that the property will appreciate more over time

B) Invest in x4-5 $150-250k houses in less desirable areas that are also turnkey

C) Same as B but need to be rehabbed 

I ran some quick calculations and it looks like the cash on cash and annual ROI are better in scenario A with some decent cash flow as well, and in my opinion less headache of rehab and just simpler in terms of management since there are less properties and little to do other than regular maintenance for the near future. Am I wrong about this? Am I not considering something? Thanks!


I think it all depends on your appetite for risk. A) low risk, good for appreciation and cash flow. B) medium risk, appreciation and cash flow. C) high risk, maybe cash flow (If it's in a less desireable area then there may be a cap on rent opportunities) and some appreciation (lots of factors affect appreciation. Main one would be the capital expenditures required). Personally I would go with A or B (but know the effects of a 'less desireable' area) because they're turnkey and reno'd. Rehab requires too much time and effort in my opinion! This article really helped me frame my thinking about rehab projects: https://blog.sharesfr.com/turn... Are you also planning a cash buy with the $900k? Because you can own a lot more than 3 properties within scenario A with $900k. 

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Replied Apr 27 2023, 08:58

Thanks for the response and this kind of goes along with my thoughts already. Are you saying own more properties by using the 900k split as down payments only? I know a lot of people don't like to put all their cash in, but when I have done analysis with this for long term rentals it seems getting loans at their current rates leads to the numbers not working. 

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James Hamling#3 Real Estate News & Current Events Contributor
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James Hamling#3 Real Estate News & Current Events Contributor
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Replied Apr 27 2023, 09:15
Quote from @Caroline Landreth:

Pros/Cons to the following scenario. Say you have $900k to invest would you prefer .....

A) Invest in x3 $300k houses that are turn key ready to rent (have already been nicely Reno'd so no capital expenditures needed in near future) and are in desirable locations so that the property will appreciate more over time

B) Invest in x4-5 $150-250k houses in less desirable areas that are also turnkey

C) Same as B but need to be rehabbed 

Depends on your capabilities, skills, time availability and resources at hand. 
For example, let's say your a GC or Project Manager in the trades by day profession, readily knowing how to manage a construction site, with all the connections for labor and material supply, in that one is going to benefit from doing the reno themselves most likely. 

(B) is a no-go plan regardless. A poor performing market is a descending market in the vast majority of cases. Remember this is INVESTING and with that our lens of focus is measured in years and decades not months. A poor performing market brings additional issues novices rarely think upon such as lack of vendors to service such area, lower tenant quality, higher instance of tenant damages, higher instance of tenant defaults, evictions etc. all driving up cost of operations. 

Thing to keep in mind is APPRECIATION CREATES CASH-FLOW.    Under (A) what the "big ugly"? Most often the worst thing a person can say is low cash-flow. Ok, but if it's an appreciating area/market that means your cash-flow is GROWING every year, right. So it's NOT a "bad" cash-flowing property, it's simply one requiring PATIENCE for it to "bloom" into a cash-cow, right. 
THAT is investing, by the very definition of investing, is it not? 

APPRECIATION is hands-down without doubt THE #1 MOST important component. Why? Because regardless of property or area your expenses WILL without doubt go UP year after year after year. If your NOT appreciating, that means your in a nightmarish scenario where operational expenses are out-pacing revenues and it's only a matter of time as those growing operational expenses cannibalize your cash-flow into oblivion, and into the red. 

"Guru's" whom I won't name that focus on fancy BS  tag-lines to sell memberships conveniently skip this entire force factor. Are they unaware of it, or just not fully informing people because it doesn't "sell the dream" IDK, and honestly I don't care, there just pumping sunshine up tail-pipes. 

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Replied Apr 27 2023, 10:19

Thank you so much, this makes the most sense to me and all your points just validated that. 

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Alex Bekeza
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Alex Bekeza
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Replied Apr 27 2023, 10:54

@Caroline Landreth

There are so many practical and tax advantages to using leverage. Personally I've done a mixture of turnkey and BRRRR in the same neighborhood and I have slight buyers remorse over doing those turnkeys. There's nothing wrong with them, they cash flow just fine w/ minimal issues but I just realize I could have kept that money moving much more efficiently than a chunky set it and forget it down payment. Now that I have a bit more experience I'm sticking to BRRRRs.

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Teesh L.
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Replied Apr 27 2023, 11:05
Quote from @James Hamling:
Quote from @Caroline Landreth:

Pros/Cons to the following scenario. Say you have $900k to invest would you prefer .....

A) Invest in x3 $300k houses that are turn key ready to rent (have already been nicely Reno'd so no capital expenditures needed in near future) and are in desirable locations so that the property will appreciate more over time

B) Invest in x4-5 $150-250k houses in less desirable areas that are also turnkey

C) Same as B but need to be rehabbed 

Depends on your capabilities, skills, time availability and resources at hand. 
For example, let's say your a GC or Project Manager in the trades by day profession, readily knowing how to manage a construction site, with all the connections for labor and material supply, in that one is going to benefit from doing the reno themselves most likely. 

(B) is a no-go plan regardless. A poor performing market is a descending market in the vast majority of cases. Remember this is INVESTING and with that our lens of focus is measured in years and decades not months. A poor performing market brings additional issues novices rarely think upon such as lack of vendors to service such area, lower tenant quality, higher instance of tenant damages, higher instance of tenant defaults, evictions etc. all driving up cost of operations. 

Thing to keep in mind is APPRECIATION CREATES CASH-FLOW.    Under (A) what the "big ugly"? Most often the worst thing a person can say is low cash-flow. Ok, but if it's an appreciating area/market that means your cash-flow is GROWING every year, right. So it's NOT a "bad" cash-flowing property, it's simply one requiring PATIENCE for it to "bloom" into a cash-cow, right. 
THAT is investing, by the very definition of investing, is it not? 

APPRECIATION is hands-down without doubt THE #1 MOST important component. Why? Because regardless of property or area your expenses WILL without doubt go UP year after year after year. If your NOT appreciating, that means your in a nightmarish scenario where operational expenses are out-pacing revenues and it's only a matter of time as those growing operational expenses cannibalize your cash-flow into oblivion, and into the red. 

"Guru's" whom I won't name that focus on fancy BS  tag-lines to sell memberships conveniently skip this entire force factor. Are they unaware of it, or just not fully informing people because it doesn't "sell the dream" IDK, and honestly I don't care, there just pumping sunshine up tail-pipes. 

it's whatever numbers work for you @Caroline Landreth! what's a great deal for you may not be a great deal for 90% of people. the point James made is valid about the B Scenario, hence my question about what you mean by "less desireable areas". but in summary, I am all for turnkey properties. less headaches, less hassle, no renovations, some companies guarantee repairs, and the property management aspect is what's super important to me. I'm Canadian investing in the US and I work full time, so I don't have the ability to sink time, effort, and resources to manage myself. if youre investing in Scenario A where they are in desirable locations, the asset is bound to appreciate over time. so the additional fees you would be paying for turnkey properties, property management, etc. are justified in my eyes

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V.G Jason
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Replied Apr 27 2023, 13:10

James it hit it on the head, but to make things a bit different. If rental #s aren't terribly OTM, two $450k houses could be even better.

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Konstantin Ginzburg
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Konstantin Ginzburg
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Replied Apr 27 2023, 13:53

It's very hard to give you an answer since it will come down to your personal preference. As a general rule of thumb: houses in great areas and are move-in ready (generally referred to as class A properties); tend to have a smaller return on the investment but instead provide less work and have a higher probability of attracting higher quality tenants (all tenants still need to be screened regardless). So this allows for a more passive return path towards real estate investing. The properties that need work or in less ideal neighborhoods often provide higher cash flow at the expense of needing a more direct approach to managing that property. So which option you should pick depending on what you are looking to get from the investments: higher return on your investment or a more passive investment option.

Another thing I would like to point out that's been mentioned a few times in this post already is the advantages of using debt to purchase more real estate rather than paying all-cash for any property you select. I am going to copy in an excerpt from a book I write that I think goes over the debt-leverage strategy for purchasing real estate (sorry in advance for the self-promotion):

"This leads directly into a concept I would like to discuss known as debt leverage. When you purchase a property, you not only gain equity and return in investment on the money you paid towards the property’s down payment but on the full value of the asset. This may seem like a very simple and
common-sense statement, but its importance cannot be overstated. If you have a certain amount of capital to invest; pursuing traditional options such as stocks, mutual funds, index funds, certificate of deposits, etc. will allow the total capital you have invested to grow at a given percentage. By contrast,
leveraged debt in real estate acquisition allows not only the capital you have invested up front to grow but the full value of the property that was acquired through leveraged debt from a lender. To truly understand how important this is; I would like to provide the following example:

You have $100,000 to invest. You want to pick one of three investment routes. You can purchase
a single house that costs $100,000 (let’s assume a conservative 3% increase in annual value driven by normal inflation), you can purchase $100,000 in an index fund (let’s assume a reasonable 9% annual return on investment), or you can purchase 5 houses using a $20,000 deposit for each house (we will assume the same conservative 3% increase in value). Now let’s look at how each of these investments faired at the end of 30 years (let’s pretend each house was acquired using a 30-year loan from a lender). We will also be using compounding interest in each scenario.

Scenario A:
1 house purchased for $100,000 will have a value of $242,726.25 after 30 years

Scenario B:
$100,000 worth of index funds with a 9% annual return will have a value of $1,326,767.85 after 30 years.

Scenario C:
5 houses purchased through lending will be fully paid off after 30 years and will have a total value of $1,213,631.24 after 30 years.

Now let’s discuss what these numbers mean. In terms of total value, the 5 houses and index funds have similar asset values at the end of 30 years in comparison with a single house, despite all three investments beginning with the same starting value of $100,000. By using leveraged debt, the investor in
scenario C was able to earn compounding appreciation value in the form of equity build on a real estate portfolio with an initial start value of $500,000 instead of the $100,000 effective start value that was represented in scenario A. This leveraging allowed the real estate portfolio to have a similar end asset
value to an index portfolio that was earning 3x greater annually compounding percentage return in the form of capital gains. Now let’s take this a step further to appreciate what real estate can do as an investment vehicle. Although a portion of the index fund gains may have been cash payments in the form of dividend payouts, these would need to be reinvested for us to achieve our total anticipated value after 30 years. By contrast, both real estate scenario end values only represent the appreciated values of the
assets themselves. Over the course of those 30 years, each property would also be earning a cash payment to their owners in the form of rent collected from tenants and within scenario C, there are 5 monthly rent
checks being collected from each house of that 30-year period as opposed to 1 rent check in scenario A.

Although scenario A may initially represent a higher cash flow property due to not having a mortgage payment to make each month, the combined total of 5 rental property cash flows (rent has historically gone up very often) will overtake the single property at some point in time. At the end of 30 years, scenario C would provide its investor with the highest total return on their initial $100,000 investment through the combination of appreciated real estate asset value and 30 years of cash flow profits from the 5 properties.
Properly acquired and managed real estate can truly form the foundation of generational wealth for a family and be a realistic avenue of economic progression for those willing to put the time, effort, and research into such a venture. Please remember though that real estate is not a get rich quick venture.

Properties need to be constantly maintained, tenants screened and managed, and many challenges that will need to be overcome. Unforeseen circumstances such as natural disasters can quickly lead to nightmare scenarios that will be the responsibility of the landlord to remedy. This is not a path for everyone, but it is a path open to everyone. Like all investments, it does carry with it risk and this needs to be factored into each investor’s personal investment requirements."

One caveat in all of this is that leveraged debt does open you up to increased risk which is something that should be factored in. Being able to handle risk is nothing something everyone is able to do (there is nothing wrong with that). If taking on debt risk by leveraging will cause too large a stress level for you, then investing in all cash is an option you can pursue for your properties. 


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Sherief Elbassuoni
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Sherief Elbassuoni
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Replied Apr 28 2023, 08:19

It all depends on your experience and available cash.

With BRRRR deals now, you may want to hold on the property a little more, or do a refinance now, then refinance again in 1-2 years to lower the interest rate.

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Replied May 22 2023, 07:04

All very good answers for the original question. Personally with that much capital, i would look into Private equity. Search for the builders and flippers who are looking to get loans for larger projects and finance them on a year note. I would also consider being an equity partner with the team. This helps the relationship and you are essentially being paid to lear the market and see the outcome.

In this market MultiFamily is becoming more accessible and for the time it takes to find and purchase multiple properties it may be more advantageous to put all of the doors under one roof.