NEWBIE - BRR for my first investment?

Hey Kaitlyn,

there is no right answer to this but your going to need some money saved up. I am learning now the importance of having reserve cash.

Member since 2024 · 30 posts · 12 votes

Quote from @Stuart Udis:

Don't allow underwriting properties as a BRRRR be the lone criterion you rely upon. Focus on buying quality real estate. You can purchase a distressed SF home in many markets in the US, renovate the home, obtain an income approach appraisal and get your money back. In most cases, you will likely never see the equity convert to a realized gain and 2-3 years of cash flow will be eaten up by one major capital improvement event because the entry level SF homes struggle to absorb the cost of the repair. To put this another way, would you rather leave your $40,000 of capital in a property for 2 years and then walk away with a $50,000 realization event when you sell the home or in those 2 years complete 3 BRRRR transactions, become frustrated by the reality of owning the low income housing and then sell 3 homes after 5x as much work with no gain? I am not suggesting you can't acquire a BRRRR home (although it's more difficult right now with the higher interest rates), or you will necessarily fair better with the purchase that requires you to leave your $40,000 of capital in the property. I am merely using this as an illustration of how the BRRRR method might lead to owning more homes but not necessarily lead to better return on your money or time. Don't allow the recoup of your money to be the lone decision on whether the property is a good investment.

Hi Stuart! I thought your reply was interesting. After reading Dave Green's BRRRR book and having lived through a disastrous renovation of my own home (so there's some contractor trauma), taking on a major rehab upfront and missing out on cashflow felt really stressful. So, are you suggesting focusing more on getting a good deal, so really making sure your numbers are rock solid, and then putting in the best offer and going from there? When you read Dave Green's book from 2018, he's batting around numbers under $100k, which feels pretty unrealistic for something that's not in shambles.

Member since 2024 · 30 posts · 12 votes

Quote from @Kaitlyn Aragon:

Quote from @Carrie Matuga:

I'd start by setting aside time each day to analyze 5 deals in your chosen market. See if the BRRR would work based on current rental rates (ideally last 90 days but no more than 6 months out) and what similar fixed properties are selling for. At the same time I'd talk with a few lenders and get prequalified - get your documents in order! AND probably most important, talk with an investor-friendly real estate agent - learn the market, get property management recommendations and look at facebook groups for other investors in your chosen market.

Oooo I love this reply! Thank you, Carrie! Thank you for providing actions I can take immediately. I have trouble analyzing markets (or at least doing that correctly). Any advice on that would be very helpful.

I second @Kaitlyn Aragon's comment - what's the best way to do this? Is there an equivalent of fantasy football in real estate?

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

@J Newman

it's not 2016 anymore, unfortunately so analyzing on-market deals is not going to get you anywhere.

the best BRRRR deals are generally off market, and involve very tough rehabs.

BRRRR is also not a cash flow strategy right now - it's an equity strategy. if done right, you end up with a break even property, and a good amount of equity.

Member since 2024 · 30 posts · 12 votes

Quote from @Nicholas L.:

@J Newman

it's not 2016 anymore, unfortunately so analyzing on-market deals is not going to get you anywhere.

the best BRRRR deals are generally off market, and involve very tough rehabs.

BRRRR is also not a cash flow strategy right now - it's an equity strategy. if done right, you end up with a break even property, and a good amount of equity.

Thanks for that! Yeah, "very tough" rehabs don't sound like where I would like to start. I'm new to this as well, but kinda not. My family has alot of property and all of it's paid for, but I've been now pushed abruptly into managing it after years of my family keeping me out of it. My goals are different than what it had been - yes, we want cash flow but I want to cut expenses and earn future income and equity for my children. Rental income paid for my college, and now it's my Dad's retirement. So, I have to preserve some of that cash flow, but given the equity we have, I'm trying to figure out how to manage these goals. I'm completely buried right now in getting the finances straightened out, but I don't know how best to start with that.

Johann Villalvir

Real Estate Consultant · San Francisco, CA · Member since 2023 · 109 posts · 71 votes

These are great questions, we help newbies overcome analysis paralysis by letting them examine one deal at a time with all the data they need to make a pass or pull the trigger. The only way to learn to swim sometimes is to just jump on the water

Vaibhav Pandey

New to Real Estate · Los Angeles, CA · Member since 2022 · 11 posts · 2 votes

Quote from @Stuart Udis:

Don't allow underwriting properties as a BRRRR be the lone criterion you rely upon. Focus on buying quality real estate. You can purchase a distressed SF home in many markets in the US, renovate the home, obtain an income approach appraisal and get your money back. In most cases, you will likely never see the equity convert to a realized gain and 2-3 years of cash flow will be eaten up by one major capital improvement event because the entry level SF homes struggle to absorb the cost of the repair. To put this another way, would you rather leave your $40,000 of capital in a property for 2 years and then walk away with a $50,000 realization event when you sell the home or in those 2 years complete 3 BRRRR transactions, become frustrated by the reality of owning the low income housing and then sell 3 homes after 5x as much work with no gain? I am not suggesting you can't acquire a BRRRR home (although it's more difficult right now with the higher interest rates), or you will necessarily fair better with the purchase that requires you to leave your $40,000 of capital in the property. I am merely using this as an illustration of how the BRRRR method might lead to owning more homes but not necessarily lead to better return on your money or time. Don't allow the recoup of your money to be the lone decision on whether the property is a good investment.

Interesting thought. What you said makes sense. I do have a follow up question, would we not save on taxes by doing a BRRR strategy vs buy and hold ? I do understand if your W2 taxes are not high enough then this doesn't matter but if someone is paying a lot in taxes BRRR or any house flipping strategy might also save on taxes.
I am new to REI as well so still learning.
@Kaitlyn Aragon all the best to you, do share your journey to encourage the rest of us newbie.

OP

Investor · Charlotte, NC · Member since 2023 · 26 posts · 21 votes

Quote from @Nicholas L.:

i like what @Michael Dumler said.

unfortunately BRRRR is very difficult right now. and let's be very clear: a successful BRRRR gets you a big equity boost. but it is not a passive income generator. you will likely break even, especially if you refinance into a DSCR loan with a higher interest rate.

i just did a rehab i hoped would be a BRRRR but it wasn't going to appraise OR cash flow! so i had to sell it. great project and i am proud of the rehab that was done. but it wasn't a BRRRR - the market was unforgiving.

Thanks for that insight Nicholas. Can you explain more on why todays market is not set up for BRRRR? Also, the deal you did would now be considered a flip right? Can you share those numbers? Did you profit?

Great insight, thanks again

OP

Investor · Charlotte, NC · Member since 2023 · 26 posts · 21 votes

Quote from @Nicholas L.:

@J Newman

it's not 2016 anymore, unfortunately so analyzing on-market deals is not going to get you anywhere.

the best BRRRR deals are generally off market, and involve very tough rehabs.

BRRRR is also not a cash flow strategy right now - it's an equity strategy. if done right, you end up with a break even property, and a good amount of equity.

Wanted to chime in - so what is the best way to get cash flow right now in your opinion? Flipping? Or should I just know I am going to get solely equity in this market?

OP

Investor · Charlotte, NC · Member since 2023 · 26 posts · 21 votes

Quote from @Johann Villalvir:

These are great questions, we help newbies overcome analysis paralysis by letting them examine one deal at a time with all the data they need to make a pass or pull the trigger. The only way to learn to swim sometimes is to just jump on the water

I am learning that now, Johann! I am looking at a bunch of properties this weekend, spoke with my first lender (DCSR) yesterday, and have about 10 deals I want to (attempt) to analyze. I plan on posting the analysis on here to get some feed back. BP has given me more than my mentorship ever has!

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

lots of things are making BRRRR tough right now, especially the increase in rates and the fact that prices have leveled off. if you did a BRRRR in 2020 and just waited 12 months, prices would go up, and that would help your appraisal. that is not the case anymore. other factors are making it difficult too - there is lots of competition for deals, both on and off market; lots of good contractors are booked up; and lending has tightened a little, and it's harder to get a higher LTV.

so again, i'm not saying you can't BRRRR - lots of folks are. the point is that it's not a cash flow strategy. if done right, you'll wait 6-9 months, get most or all of your cash back... and have a break even property. that's a great outcome! It just doesn't get you any cash. it takes cash and consumes cash.

yes, the deal i sold would be a flip. i bought a SFH for 45, spent 55 to rehab, and sold it for 115. subtract closing costs... and you'll see there wasn't a lot of profit. i was hoping to sell for more, and i ran into a last minute issue that consumed my contingency.

the best way to get cash flow is some combination of off market + a creative strategy. but that's also higher risk! so again, it's just a tough market right now.

Jake BakerBusiness Member

Flipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 696 votes

My first property was a primary residence that I house hacked.

Second property was a rental property that needed $8k in repairs.

Third property was a flip that made a modest return.

Now we do 20+ flips/brrrs per year and raise money for them.

The point here is that you don’t have to start with a grand slam. I learn so many skills from each one of those deals.

[email protected]

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John MorganPro Member

Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes

@Kaitlyn Aragon

I would start by going to local RE meetups. Network with others in your area and pick their brains. Don't start with a BRRRR unless you have deep pockets. You'll run into all kinds of unexpected problems that will cost you a lot of money. I'd get a cheap turnkey property and put 20% down for my first one.

3 Reply

Tony Pellettieri

Investor · NC/SC · Member since 2023 · 150 posts · 77 votes

Hey Kaitlyn, Welcome to the world of Real Estate Investing. We remodel homes just south of Charlotte in Chester, SC and practice the BRRRR strategy. Closing on investment properties can become addicting. The more you do it, the more you want to do it again and again.

I attribute the majority of my success and motivation to the knowledge I have acquired. While getting on BP is a great place to network and receive feedback as well as learn, I think educating yourself is a great base before getting started.

If you are interested using the BRRRR strategy and haven't gone through the book already, I'd highly recommend listening to on Audible or reading the hardcopy of the book.

BRRRR on Amazon

BRRRR on Audible (1st and 2nd download w/ audible are free I believe)

Alex Church

Lender · Springfield, MO · Member since 2023 · 28 posts · 19 votes

For your fist property, I recommend finding a property that needs just light rehab, and then connect with a local realtor who can figure out what the After Repair Value would be based on recent comps in the area.

Honestly, I would start with a small fix and flip first to get more capital to work with, and then start on the BRRR projects for passive income. For each rehab project you complete, you can cashout refi and use the cash out as your down payment for the next property. Just make sure you don't choose a property that needs a ton of rehab, I've seen people get in a bad spot when they try to take on more than they can handle and then ends up dragging out the process and costing them more money.

Jason Munger

Rental Property Investor · Lansing, MI · Member since 2017 · 58 posts · 18 votes

As many others have said, start with financing. Even if it's just a discussion with the lender. You don't even have to do an actual application at first. Just see how much you could get (roughly). You want to be careful how many times your credit is pulled until you are ready to take action.

Based on your debt, income, credit, etc. they should be able to give you a rough idea of what you would qualify for. Then when you are ready to get for serious, have a proper pre approval done since you will usually need that for an offer.

Once you know your approximate budget, you can determine if a buy and hold or flip in your area is even feasible. If it isn't, than you can explore other options. Remote investing? Although not ideal for your first deal, it's an option. Or maybe you go another route to build up some cash. Wholesaling, Subject 2, joint venture, owner financing, just to name a few.

OP

Investor · Charlotte, NC · Member since 2023 · 26 posts · 21 votes

Quote from @Tony Pellettieri:

Hey Kaitlyn, Welcome to the world of Real Estate Investing. We remodel homes just south of Charlotte in Chester, SC and practice the BRRRR strategy. Closing on investment properties can become addicting. The more you do it, the more you want to do it again and again.

I attribute the majority of my success and motivation to the knowledge I have acquired. While getting on BP is a great place to network and receive feedback as well as learn, I think educating yourself is a great base before getting started.

If you are interested using the BRRRR strategy and haven't gone through the book already, I'd highly recommend listening to on Audible or reading the hardcopy of the book.

BRRRR on Amazon

BRRRR on Audible (1st and 2nd download w/ audible are free I believe)

Hey, Tony! Thanks for the suggestion. I am always trying to learn more as I go. I will add it to my book list.

Wish you the best

Tony Pellettieri

Investor · NC/SC · Member since 2023 · 150 posts · 77 votes

Best of luck!

Member since 2024 · 30 posts · 12 votes

Quote from @Tony Pellettieri:

Hey Kaitlyn, Welcome to the world of Real Estate Investing. We remodel homes just south of Charlotte in Chester, SC and practice the BRRRR strategy. Closing on investment properties can become addicting. The more you do it, the more you want to do it again and again.

I attribute the majority of my success and motivation to the knowledge I have acquired. While getting on BP is a great place to network and receive feedback as well as learn, I think educating yourself is a great base before getting started.

If you are interested using the BRRRR strategy and haven't gone through the book already, I'd highly recommend listening to on Audible or reading the hardcopy of the book.

BRRRR on Amazon

BRRRR on Audible (1st and 2nd download w/ audible are free I believe)

I'm in Charlotte. Where did you start? Or maybe a better question where would you start now with a BRRR if you had it do over again in this market?

Member since 2024 · 30 posts · 12 votes

Quote from @Kaitlyn Aragon:

Quote from @Johann Villalvir:

These are great questions, we help newbies overcome analysis paralysis by letting them examine one deal at a time with all the data they need to make a pass or pull the trigger. The only way to learn to swim sometimes is to just jump on the water

I am learning that now, Johann! I am looking at a bunch of properties this weekend, spoke with my first lender (DCSR) yesterday, and have about 10 deals I want to (attempt) to analyze. I plan on posting the analysis on here to get some feed back. BP has given me more than my mentorship ever has!

Hi @Kaitlyn Aragon - what tools are you using to analyze deals? The BP pro tools? Others?

OP

Investor · Charlotte, NC · Member since 2023 · 26 posts · 21 votes

Quote from @J Newman:

Quote from @Kaitlyn Aragon:

Quote from @Johann Villalvir:

These are great questions, we help newbies overcome analysis paralysis by letting them examine one deal at a time with all the data they need to make a pass or pull the trigger. The only way to learn to swim sometimes is to just jump on the water

I am learning that now, Johann! I am looking at a bunch of properties this weekend, spoke with my first lender (DCSR) yesterday, and have about 10 deals I want to (attempt) to analyze. I plan on posting the analysis on here to get some feed back. BP has given me more than my mentorship ever has!

Hi @Kaitlyn Aragon - what tools are you using to analyze deals? The BP pro tools? Others?

I am currently using BP calculator, a different "flip" calculator I got from my mentorship, and then just a quick ARV assessment through comps. What about you?