Advice on BRRRR strategy

[Mark Delosreyes]

I have successfully BRRRR'd 40+ properties in my 8 years of being a real estate investor. I recently listened to the BP podcast on the "Perfect BRRRR", where you pull out 100% of your investment. Out of the rentals I've BRRRR'd, I've only had 1 rental where I've left money in the deal; every other deal I've pulled out extra capital to put in my reserves or invest in the next property. This is all while maintaining $200 per month cash flow after PITI, vacancy, repairs, management fee, and capex. I have learned that cash flow is kind of an illusion with SFHs, especially when you need a new HVAC, roof or other large repair. That's why we started flipping houses; the money is made from equity, rather than cash flow.

Question: I’m about to do a cash out refi on a bundle of houses. Should I cash out the maximum amount of equity, while maintaining a much lower per month cash flow (still +), or should I stick to my $200 per unit target and be glad I’m getting all of my investment back?

[Benjamin Aaker]

Great question. It depends on your long term plans and how many years you have before leaving active real estate investing. I'm a huge proponent of building equity. If you are earlier on in your career, you should take as much out as you can (which decreases your equity in your current properties) and start building equity on new properties. As you get farther along, you will want to start structuring it for cash flow.