Brrrr method question?

Question

So I’ve been researching the brrrr method, and have found it very helpful, I’ve learned that you can refinance almost immediately using hard money lenders. My question is why does it take so long for people to reach 100 doors? If I was to buy my first home fix it up, rent it than refinance immediately, it should only take 3 months or so to rehab, pull out my money immediately, so I could have about 4 doors year one. If I don’t touch that money and keep reinvesting it, by the second year I should have bought around 10 homes, than 20 my third year, 40 my fourth and so on and so on. What am I missing here? Are many people conservative and not want that many doors. And yes I do want to become very wealthy from real estate, I grew up poor and would like nice things so please don’t come for me on that.

River Sava · Answer

Hey Sam -

Great question as it seems very simple on paper, as most things do. Think about the objective of a soccer game. Simply put the ball into the back of the net, right? Seems easy enough with potential to score a lot of goals.

Now we need to factor in the other players, defenders, 3rd parties (coaches, refs, fans, etc). The game becomes a lot more complicated which is why it is not a high scoring sport, generally speaking.

Same idea applies when it comes to scaling. While it is possible to scale quickly, there are usually other factors that come into play.

Kevin Sobilo · Answer

@Sam Deb, on paper that looks great no doubt.

In reality what skills and resources are most investors starting with?

1. Are they expert property managers?

2. Do they have a team in place to beat the bushes to source deals to buy?

3. Do, they have project managers and contractors on staff to manage multiple rehabs at once and to start immediately and finish without delay?

4. Do, they have the financial expertise to manage all of this exponential growth from the get-go?

Those are just a few of the reasons that growth doesn't explode magically even though on paper it looks possible.

There are some people who do have some skills/experience in aggregating and do grow faster and bigger than others.

Most investors goals are more modest perhaps to replace their W2 income and get financial freedom and that doesn't require 100 doors. Maybe 15-50 depending on if you have any other income, what kind of market you live-in and whether they are fully leveraged or not.

Also note that you can refinance with lenders other than hard money lenders. Local community banks and credit unions may have no seasoning period for their portfolio loan offerings. They also often do smaller loans that other lenders won't touch.

Kristen L Garner · Answer

For the refinance you might want to consider options other than hard money.  Hard money is more suited for the first step of acquisition as a quick, short term loan.  There are plenty of nonQM products that have no seasoning period for the refi that will have much friendlier terms for a property you are going to hold and rent.

As far as why it takes time to scale - the most common slow down I see is the time it takes to find the next property that checks all of the boxes to be a successful BRRR with numbers that will work.

Best of luck!

Jacob Sherman · Answer

Having the money is the lease of issues . Its finding the deal and securing the contractor that delivers the property rent ready to you in those 3 months . Then finding the renter to refi for a max loan to value ratio . Seasoning isn't a problem either

Bill B. · Answer

“If information was the key to success we’d all be millionaires with 6 pack abs…”

There are certainly  people who have done it in less than 5-7 years. Why not just get started and see what breaks first. Do you run out of properties to buy, workers to do the remodels, lenders to borrow to you, cash flow to pay the mortgages. Fix that problem and move forward. But make sure this fits your goals. What if you end up with 100 properties that cash flow $100/mo each on a good month? You have $10k/mo, something you might get 5 great properties or 10 good ones. That means you’re doing 10x the work.

Kevin Sobilo · Answer

Hard to do in 5-7 years because people seeking financial freedom still have to live. So, most are working a w-2 job full-time in addition to real estate investing.

However, if you did a BRRRR on a 2 unit property every year for 7 years that is certainly doable for 14 units plus you might generate enough cash-flow to buy an additional property or two that are already rent ready.

Some people can do more rehabs and faster, but one per year is very doable for most people. Perhaps one thing that gets lost is that for BRRRR to work numbers wise you are usually doing significant rehabs not just paint and flooring. You need to add a lot of value with the rehab for the numbers to work.

John Morgan · Answer

@Sam Deb

It’s taken me 9 years to get 25 SFR buy n holds. I was only able to buy 2 houses a year for the first 7 years. It’s not as quick and easy as you think. But you might be able to do it much faster than me. The hard part is finding cash flowing deals. Run some numbers and you’ll see what I’m talking about. lol

David Ramirez · Answer

Hey @Sam Deb,

Everything sounds easy until you put it into practice. Finding a property that will cash flow after refinancing is very challenging these days. You would need to find a non-appreciating market where rents are high in comparison to home prices to at least get a 2% rule, even though you will probably break even or have negative cash flow due to interest rates. If you are just starting out, a lender will probably not refinance more than 70% of the appraised value of your property. So, unless you have a home run deal (PP 60% of ARV - Repairs), you will likely leave part, if not all, of your money in the property.

I'm not saying it's impossible to achieve, but it's always good to have decent expectations so you don't give up after your first deal.Best of luck!

Marcus Auerbach · Answer

I think the most I have done in a year while W2 was 5 BRRRRs. And that was nuts, because they were all full gut rehabs. The reality is if you can pull off only one clean BRRRR every year your net worth growth is way head of anyone you know.

But that was when we still had inventory and rough deals would sit until the price comes down. Milwaukee is probably still one of the better markets, but getting 20k discount for a property that needs 50k of work does not make much sense. What helps is 7.5% appreciation we had in 2023, so instead of having to work for equity is now I can just watch it happen.

Glen Wiley · Answer

Rate of expansion has a lot to do with personal risk tolerance. We have grown very slowly because we prefer to take a very conservative approach to growth. We always maintain large cash reserves and an LTV at or below 75%.

If you are willing to take risks then you can grow very quickly. Bear in mind what that means though - you are risking loosing as well. For some people this is fine for others, it will ruin their quality of living by making them stress heavily.

Consider your personality and how much stress you can handle before life sucks for you then set up your growth plan to fit.

Brrrr method question?

Most Popular Reply