I'm new to investing and want to learn more!

BRRRR - Buy, Rehab, Rent, Refinance, Repeat

I'm new to investing and want to learn more!

New to Real Estate · Member since 2023 · 14 posts · 2 votes

When it comes to BRRRR method do you put your own money down or do you get someone's money? If you need capital to start how much would you say the minimum someone should have saved?

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Randy Rodenhouse

Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes

If you are new to investing I would not start out with the BRRR method especially in today's environment. Here is why?

You have to buy the property right and at a low enough price, you have to renovate the property and there are sooo many things that can and do go wrong with the rehab process. Then, if you get the renovation done successfully, you now have to find a good tenant. Then you have to manage the tenant and deal with maintenance and repairs. Now after all that, you have to go to a lending institution and try to get a loan and there are many requirements (as explained above) making it difficult to get that loan.

Wow! So many moving parts.

Even just doing one of those is hard enough, but now you have to be an expert in finding discounted properties, rehabbing properties, rental and property management, maintenance, and raising capital and getting loans.

The BRRR strategy stacks the odds against your success when starting out.

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Randy Rodenhouse
Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes
2y
If you are new to investing I would not start out with the BRRR method especially in today's environment. Here is why?
You have to buy the property right and at a low enough price, you have to renovate the property and there are sooo many things that can and do go wrong with the rehab process. Then, if you get the renovation done successfully, you now have to find a good tenant. Then you have to manage the tenant and deal with maintenance and repairs. Now after all that, you have to go to a lending institution and try to get a loan and there are many requirements (as explained above) making it difficult to get that loan.

Wow! So many moving parts.

Even just doing one of those is hard enough, but now you have to be an expert in finding discounted properties, rehabbing properties, rental and property management, maintenance, and raising capital and getting loans.

The BRRR strategy stacks the odds against your success when starting out.
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Sara Habtom
OP
New to Real Estate · Member since 2023 · 14 posts · 2 votes
2y
What would you say is the best method for a beginner? Do you think North Carolina is a good state to start out?
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Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
2y
@Sara Habtom if you are purchasing the property yourself - then your own money is used. With the BRRRR Method it is possible to not come out of pocket anything...but that is extremely unlikely. I usually suggest having $15,000 - $20,000 when doing the BRRRR Method. And of course, if you are new we want you to get training as best as you can. Some things to be aware of:
Generally speaking you will need several things to successfully complete a BRRRR:
1. ARV - being able to calculate the Value on your own (meaning, without the wholesaler telling you the value) is really important.
2. Repairs - You will likely need to know how to budget the repairs as well. Getting a contractor can be extremely frustrating especially if you need to make an offer without even looking at the property. How do you calculate repairs without a contractor? You may need to lean on other local real estate investors in the beginning. Or maybe even just focus on properties with a very light rehab?
3. Lenders - You will need a lender on your BUY step and on your REFINANCE step. And I would HIGHLY recommend to read this article I wrote for Bigger Pockets on how to find good lenders that you can find HERE. If they are good, they should be absolutely definitive on rate, terms, costs, etc. Trust me, many lenders will tell you they can do this...but it's very rare to find. When I first started BRRRR'ing my properties lenders would tell me "That's illegal"....it's not, they just didn't know anything about it.
4. Finding Properties - and this is the absolute hardest step of anything right now. So network like crazy and find some good resources. It's going to be hard...but if it were easy then anyone could do it.
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Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
2y
It takes money to make money, but it doesn't have to be your money!
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Account Closed
New to Real Estate · Member since 2021 · 10 posts · 7 votes
2y
@Sara Habtom, The BRRRR strategy relies heavily on how much equity you can pull out of the home to use to purchase your next property. This equity is used to purchase the next home, but it has to be equity you own. This would be of course the down payment (i.e. 15-20%) of the purchase price of the home. An added component to think about is the forced appreciation/ARV of the home, this "bonus value" will be calculated into the refinance when you do decide to.
Example: 100,000$ purchase price. You put 20% down = 20,000$. Bank loans you 80% of the value = 80,000$. Lets say you increase the value of the home by 50,000$. Present value of home is now 150,000$. When you refinance, you can pull 80% of the (ARV = 150,000$), giving you 120,000$ to invest in your next property.

You only put about 70,000$ into the property, but because of the increase in value and refinance, you are now leveraging an extra 50,000$. Of course check with lenders and other investors in the area before pulling the trigger.

If anything I said is incorrect, please correct me. I am still learning about investing as well.
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