5 Year Plan For Success

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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5 Year Plan For Success

Rianna Mcgee
Member since 2020 · 25 posts · 16 votes

Hello all, my name is Rianna, I am 22 years old and I have been using Bigger Pockets for a few years now just to get some knowledge on REI. I have some experience wholesaling but I am still working my full time job. I want to make this post to see if I can get some insight from some more experienced investors and maybe some tips to help better my journey in being successful. My goal is to be financially free and not have to work a 9-5 by the time I am 30. The area I plan on investing in is Kansas City. I recently made a vague 5 year plan that is based off of one of the plans from "The Book on Rental Property Investing". My goal is to be able to make atleast 100k a year through rental property investing. I'd like to mention that my fiance is also going to be my partner in all of this and will contribute as well.

Year 0 (the year before I start)

-Save as much as possible from our jobs, any side jobs we do, and wholesaling.

-Work on building my credit score so I can get funding.

-Continue to gain as much knowledge as possible to prepare me for success.

Year 1 (the first buying year)

-Buy the first investment property using the money saved from the previous year (down payment on a hard money loan).

-I plan on doing the BRRRR method for this property so that I can buy another property towards the end of the year.

-Keep in mind that I am still saving money to put into more properties throughout this.

Year 2 through 4

-Continue to buy two properties a year so that I end year 4 with a total of 8 properties.


Year 5

-This is where I will sell two of the properties at the beginning of the year and either use those funds to purchase my next two properties OR to hopefully pay off at least one of the mortgages owed on one of my properties.


-As mentioned above, I will be buying an additional two properties by the end of the year. So I am selling two and buying two, never having more than 8 properties.

Year 6 and so on

-I will continue the pattern of selling two and buying two and hopefully starting to pay off multiple properties so that my monthly cash flow can durastically increase making it so that I can do RE full time.

So the way I wrote this plan is very basic as I just wanted to give the key points. I know there's going to be a lot more work put into it which is why I would like to take a whole year to invest in myself by gaining more knowledge, mostly on the numbers portion of investing. 

Please comment below if there is ANYTHING I should add to this or if you all have any tips for me as any feedback is greatly appreciated. I do want to also add that although I want to do this for the pay, real estate has always been a dream of mine ever since I was a kid. I am very passionate about houses and really see myself doing this as my life's work.

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2y

why not sequentially house hack instead?  

11Reply
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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    why not sequentially house hack instead?  

    11Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y
    Quote from @Nicholas L.:

    why not sequentially house hack instead?  

    @Nicholas L. So I was thinking about that as well. But, I need more explanation on it. So lets say I buy a duplex or triplex 3.5% down and live in it for a year. Then, do I just refinance into a conventional loan, rent out the whole property, and move out and keep doing it over and over? I guess my question is, at what point can I stop doing that? I don't want to keep moving every year forever. So how would I transition?

    1Reply
  • Joshua ChristensenPro Member
    Real Estate Broker · Albuquerque, NM · Member since 2015 · 281 posts · 232 votes
    2y

    I agree with @Nicholas L.

    Do you currently own your house? Go buy another house and turn your current home into a rental. FHA only requires 3.5% down. Find something that needs some work so you can get a discount on it (built in equity). Fix it. Cash out Refi. Find the next one. I bought my last house on a private note for $500 out of pocket and took over the guy's mortgage. I'm buying another one in a few months for $5k and taking over their note while turning the first one into a rental with good cash flow. Don't make it harder than it needs to be. Just make it work for you.

    4Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    @Joshua Christensen I currently rent an apartment. Does FHA loan allow you to get a distressed property? And does it pay for some renovations as well? I am just stuck on how do I end the loop. Do I keep doing this until I have my total off 8 properties owned like I originally planned? And then I can just start buying them without the FHA loan?

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Rianna Mcgee FHA does allow you to buy a distressed property. You don't have to refinance out of your FHA loan when you move out. You can just buy your next property as a conventional...you are allowed to have 2 FHA loans but there's some rules to it. Worst case, use 5% down conventional.

    Keep in mind that the BRRRR Method is there because when we purchase a rental property from the MLS we need 15%-25% downpayment. That's a lot of money for anyone. So, the BRRRR Method (and other "creative" methods) allow us to acquire properties with less out of pocket.

    However, on my own primary home...I can buy with 5% down, 3.5% down, 3% down...and then there are these great "Downpayment Assistance Programs" (sometimes called "First Time Homebuyer Programs" - but you don't always have to be a first time homebuyer) that will allow me to buy with even LESS out of pocket.  I'm saying this because there's nothing wrong with just buying a "move-in ready" home that needs no work when you ALREADY have the least amount out of pocket possible.  

    I hope that makes sense how I am describing those things.

    4Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    2y

    Starting young is a huge advantage.  The plan sounds good .  If it were me, I would look to learn my market really really well in the first year and do the 50 house rule.  I would then keep my leverage as low as possible and make sure I am buying really good deals.  You can buy overleveraged, overpriced rentals all day long.  The good deals take a bit of effort.

    2Reply
  • Joshua ChristensenPro Member
    Real Estate Broker · Albuquerque, NM · Member since 2015 · 281 posts · 232 votes
    2y
    Quote from @Rianna Mcgee:

    @Joshua Christensen I currently rent an apartment. Does FHA loan allow you to get a distressed property? And does it pay for some renovations as well? I am just stuck on how do I end the loop. Do I keep doing this until I have my total off 8 properties owned like I originally planned? And then I can just start buying them without the FHA loan?


    FHA has a rehab purchase program that will actually allow you to roll the cost of rehab into the purchase. It's call a 203k loan. So on distressed properties, yes. There are a lot of nuiances, so discuss with a lender in your area that does these types of loans. Also, look at HUD homes. They have a $100 down payment program and I believe it can be used in conjuction with an FHA 203k loan. look up the HUD repo website to find homes in your area. It will tell you if it qualifies.

    Conventional loans require 3-5% down and can have some distress, but with limitations.  It still needs to be habitable.  You can move in and do the work as you live there.

    The third option is to find sellers with distressed homes who will let you buy on owner financing for 12-24 months while you rehab the place.  Try to put as little down as possible.  These can get creative.  

    0Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    @Ian Walsh could you elaborate more on the 50 house rule and the leverage?

    2Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    @Andrew Postell yes this does make sense, thank you. But, when would I be able to stop house hacking? Once I've got as much properties as I plan on having (8)? And then start selling two and buying two as my original plan? 

    0Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    @Joshua Christensen thank you for this information, would this still work since I'd like to plan on buying two properties a year? Since with an FHA loan you need to live in it for a year before renting it out?

    0Reply
  • Joshua ChristensenPro Member
    Real Estate Broker · Albuquerque, NM · Member since 2015 · 281 posts · 232 votes
    2y

    @Rianna Mcgee - The FHA 1 year rule is a myth. There is no written rule saying you have to live there for a year. However, They look at the intention when you buy if you plan on living there. So, if you show a pattern of buying every 6 months, then your intention has shifted. You may need to consider a combination of FHA and Conventional loan programs to accomplish your goals.

    Something to consider is looking at living in the FHA for a year and the 2nd house each year being owner financed or something along those lines.

    You can mix it up in a lot of different ways.  Once you get into it, you'll start finding nuiances that can help you reach your goals.

    3Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Rianna Mcgee

    not expecting you to do it over and over - try 2 - max out W2 minimize expenses - and then re-evaluate

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Rianna Mcgee When would you be able to stop house hacking?  I mean, whenever you want to really.  Now, when will you need another primary home loan?  So, if you want another primary home within that first 12 months....then the lender will want an explanation. After 12 months, then everyone (usually) is flexible with it.  I was just kind of answering the house hacking portion of this...but to me, you can house hack AND do the other stuff if you wanted to.

    Also, did you read this article by Brandon Turner?  https://www.biggerpockets.com/blog/make-100k-year  I've been using a variation of it as well.

    0Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    @Andrew Postell So, please elaborate if this doesn't make sense. Referring to my 5 year plan, what if I was to house hack a duplex or triplex in year "0" to allow me to live for free so that I can jump start saving money in order to buy another investment property. So, at the end of year "0", I refinance into a conventional loan for that first house hack, and then I buy another property (this will be my primary residence, not another house hack) using a new FHA loan. Then, in the next year (year 1), I use the money I saved to buy my first brrrr property using a hard money loan for example. That way, by year "1", I already have my 2 rental properties and I keep purchasing 2 each year in the following years, using saved money from my owned properties. So essentially, I am jump starting a year ahead by house hacking just my first rental property. Does this seem like a good plan?

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Rianna Mcgee awesome! I love that plan. That's how I got started. Lots of people get started that way. Oh, and you don't HAVE to refinance either. You can just keep that FHA loan and get another loan afterwards. I'm saying this because refinancing costs money...so it might be more cost effective to just keep that loan where it is. You can certainly refinance if you want...but you don't have to.

    0Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    Thank you for the insight!

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Rianna Mcgee I also want to comment on something from above.  I wrestled with even saying anything...and maybe it's not that big of a deal...but others might be researching this topic so I just wanted to be clear.

    When you use a primary home loan, you do pledge to occupy the property for 12 months. You do this in writing, by signature, and have it notarized. And you do it 3 ways, with 3 different forms, under penalty. This is the same for any FHA loan and any state from any lender. Again, maybe the post above was making a different point but I just wanted to be clear on this. I am sure you will do everything above board, this is just for other people who might be researching this topic. Screenshots of the paragraphs and documents are below. I don't mean anything by this other than to be clear.

    3Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Rianna Mcgee

    just a reminder though that the goal of house hacking is not to cash flow. it's to pay a mortgage instead of renting.  if you can break even, that's awesome.  but any rent may not totally offset the entire mortgage.  and that's OK.  you're still building equity.

    0Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    @Nicholas L. Yes, that makes sense. My ultimate goal with house hacking is hopefully to have the tenant pay most, if not all of the monthly mortgage so that I'd be able to save up more money earned from my 9-5 job, versus having to pay a monthly mortgage AND save.

    0Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    @Andrew Postell I can have a tenant move in right when I move in right? Or do I need to live in it for a year before being able to rent it out? I am referring to a duplex/triplex.

    0Reply
  • Joshua Kim reid
    Investor · Winston-Salem, NC · Member since 2021 · 40 posts · 12 votes
    2y

    I have a question about house hacking. How long would you need to own a quadplex to be able to gain the appreciation, as well as being able to sell/REFI?

    0Reply
  • Rianna Mcgee
    OP
    Member since 2020 · 25 posts · 16 votes
    2y

    @Andrew Postell Regarding house hacking: Since having an FHA loan requires mortgage insurance for the life of the loan, wouldn't it be better to refinance out of it to no longer have to pay mortgage insurance?


    Regarding the BRRRR method: Since you said primary home loans requires you to pledge to occupy the property for 12 months, what happens when I get to the refinance part of the BRRRR method? I guess my question is, what loans am I looking for when its time to refinance? I would like some explanation on "cash out refinancing". I appreciate all of the responses!

    1Reply
  • Marcus R.
    Real Estate Agent · Denver CO · Member since 2019 · 209 posts · 332 votes
    2y

    Another vote for @Nicholas L.'s suggestion of house hacking but it sounds like you have a solid plan.

    Even though you hate moving, moving every 12 months is a lot less work than managing 1-2 BRRRRs at a time.  Maybe consider combining the two and every 12 months moving into the property that is being rehabbed and repeat.

    One suggestion to add to the plan is the plan when things don't go according to plan so the ship stays afloat. 

    1Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Rianna Mcgee your other units are completely fine to rent out immediately.  Sometimes when we purchase a 2-4 unit property the units might already be occupied anyway.  So, you would need to occupy one of the units as your primary home and renting out the other units is completely fine.

    And sometimes it might NOT make sense to refinance out of an FHA loan. You should absolutely be examining this in detail when the time comes. Things like your credit and the market might affect this decision so it's best just to analyze when you get there. There's no prepayment penalty to an FHA loan so you can refinance at any time it makes sense.

    And when we use the BRRRR Method we are using it on an investment property. So you would be using an investment property loan when you BUY and when you REFINANCE as well. Now, to go into detail about "cash out refinancing" might take up a little too much time here. Keep researching about it. You'll also have to know how to calculate your ARV and Rehab costs before you buy too...we can write books on all of these (and some people have).

    0Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    2y

    @Rianna Mcgee I had a similar plan that was more like a 6.5 year plan. Currently I’m about 4 years into my plan and a situation has arisen at work that has caused me to significantly fast forward this plan where I will be giving my notice and just jumping off head first into the real estate investing world full time in about 3 weeks. I’ve got 20 doors and another 5 undergoing renovation that will see the first 2 online in about a month and the next two in two more months and the third probably by May.

    Keep your plan a living, breathing document and update it at least every 3 months so you are sure to be aware of your goals and the progress you are making towards them otherwise you’ll just sit there until you’re 27 in Year 0 mode waiting for something to happen and wondering why it doesn’t.

    If I were you I’d get a large 5 subject 3 ring binder from an office supply store like Staples or online and set one month goals and 3-month goals and 1 year goals and 3 year goals and your 5 year goals and visit them at least once a month to see how much you’ve accomplished. Then with the other 4 sections you can keep all sorts or thoughts, statistics, definitions, figures, whatever.

    Ive got several of these binders and love to look back at where I was 6 months or a year ago.

    4Reply
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