BRRRR or buy multiple at one time???

Question

So I'm curious to know which way is better.

So let's say I have $100k cash and I can either put 30% down on $100k duplexes, or buy 1 in cash and then BRRRR. Which is better? Numbers show that if I bought 3 houses and after NOI and Debt service I have around $430 per house so around $1290 a month.

If I were to buy a house in cash, do whatever renovations needed and then cash out refinance to do the same thing with the next house and so forth...

The second option I can keep going whereas the first option I don't have any other cash to buy the 4th property... am I correct?

Kyle Mccaw · Answer

Using the BRRRR method, you can actively increase the property's value, which is then reflected in a new appraisal when you refinance. In contrast, if you buy a rental-ready property with a 30% down payment, you miss the opportunity to create equity.

Louisa Davis · Answer

I would be incline to do one at a time. Not because of the financial analysis, but because you are going to learn along the way. You're going to do a better job on #2 and #3 if you've already completed an iteration before that.

I focus on one deal at a time.

Jay Thomas · Answer

Hi, Curtis. Option 1 allows you to spread your investment across three properties, considerably increasing your rental revenue and accelerating portfolio growth; however, maintaining several mortgages can be difficult, potentially limiting your cash flow, especially if one property is vacant. On the other hand, Option 2 with the BRRRR strategy entails owning a single property outright, building long-term equity, and potentially cashing out through renovations, but it's a slower ride, relying on successful renovations and favorable refinancing options, and you're starting with just one property, which may limit your income potential. Consider your comfort level with managing several mortgages and the risk of vacancies vs a slower but potentially more rewarding path to ownership. Also, don't forget to properly factor in renovation costs, as unanticipated spending might throw a wrench in your plans, and consider Chandler's market feel to determine whether it's more renter-friendly or leaning toward buyers.

Alex Hunt · Answer

All about your goal and growth plan, with a Brrrr I would also add an Atleast 10% contingency for your renovation and make sure the ARV is accurate to be able to pull more cashout or pay yourself back the down payment on the refinance. It is mostly 2 loan closings as well have to keep in mind the loan costs. You should be able to get 20% down on 1-4 units not 30%, which would stretch your dollar further as far as purchasing power but the leverage will lower your cash flow. But the. You should gain more appreciation, so it’s all a fine balance & you have to weight each and see what’s best for you.

Happy to help on an lending questions!

Jake Baker · Answer

@Curtis Cecil

We do 20 Flips/BRRRRs per year in Jacksonville FL, using a hybrid approach. It is tough to "perfect BRRRR" here with consistency or anywhere for that matter with today's rate and insurance costs. Of those 20 projects, we BRRRR 8-10 per year, and the flips supplement the money left in the BRRRRs.

Curtis Cecil · Answer

Thank you for the responses. It's true to factor in vacancies if more than one go vacant but it would be the same with brrrr since after you get more than property on a loan same issue.

My goal is to replace my W2 income so I need more properties that produce cash flow. Once that's done I won't stop but at least I can look at small multi families before looking at bigger unit buildings.

Denis Ponder · Answer

Why not do both?  Find a value add duplex/triplex, invest in the renovation, refi, repeat.  Sounds like a case where you can have your cake and eat it too.

Dave Kush · Answer

Hi Curtis!

The answer probably depends on your long-term goal and how long the long-term means for you.

You are correct that if you put 30% down on three properties, you will then have to wait until you accumulate enough cash via appreciation, cash flow, and savings in order to buy the next property.

if you execute a brrrr, you would be able to keep going.

I think you're going to get different answers on the whether or not it's worth it question depending on your time horizon. In 10 years, you could brrrr a lot of properties and have way more than three. In your first year, that's possible but much less likely.

Consider your long-term goals, and that will probably tell you which way you want to go.

Let us know what you decide!

BRRRR or buy multiple at one time???

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