Haven't done BRRRR before, how to get started?

[Austin Fowler]

Is there anyone here up for a chat with a newbie to BRRRR investing? I've invested in many other areas of real estate, but not this one, and with current interest rates making purchasing good condition property unappealing, it seems time to look into fixing the house before renting.

[Marcus Auerbach]

Quote from @Austin Fowler:

Quote from @Jaron Walling:

@Austin Fowler We're close to finishing a BRRRR (possible flip) deal right now. From our experience with distressed SFH houses the market has stalled.

The market is not going to "save" investors who buy wrong. There's almost no tail winds driving prices. It's been talked about in the forums and BP podcasts lately. Prices have stagnated in most markets including my neighborhood. We're not even done with the remodel and wish we paid $7k less on the buy side. The rehab went over budget, and sales transactions have slowed. Only quality properties priced correctly are selling. We're not worried about the quality, but profit for a flip has compressed. I'm bracing for that and exploring cash-out refinance options like a conventional (6 month seasoning), or DSCR.

When you niche down into neighborhoods you see the voids. The sold price for fully remodeled home vs. a dumpster fire is crazy. Distressed properties that need basically everything have way longer DOM. 

Considering what's going on in this country REI is a first world problem. We're blessed to be in these conversations. Cheers.

"The sold price for fully remodeled home vs. a dumpster fire is crazy."

Crazy as in too close to each other? Which market do you work in?

Interesting. I've been BRRRR'ing for almost 15 years and basically stopped doing it as of 3 years ago, because there is almost no price difference between run down and move in ready. Instead, I am now buying properties close to turnkey and focus more on negotiating a discount and letting the market take care of the value increase - Milwaukee has seen very steady 7-8% appreciation per year for the last 10 years.

Why do I not buy run-down anymore? Because I can't get enough discount for poor condition. That is the whole basis for BRRRR. Our inventory is so tight that sellers don't have to lower their price, they can just sell to a desperate first-time home buyer, who thinks he can rehab on weekends with the help of his uncle and 10k in materials.

One of the best deals I have done was stepping in on a deal that had fallen through on financing and was also daisy-chained to a purchase, so the seller was very motivated, had a huge amount of equity and was excited that we could keep his original closing date.

A full-blown BRRRR for us typically means 50-80k in rehab cost and it is actually to spend 5k per week consistently and avoiding empty weeks with no work done by very tight planning. The problem of removing buffer time is if one trade takes a couple days longer you might loose the slot for let's say your drywall crew and then they have to push you back a couple weeks, which impacts everything else. So it's management-intensive.

Much easier to buy, maybe paint and carpet, install some extra ceiling lighting and dimmer switches (50s and 60s homes always lack lighting) and then have it rented 2 weeks later.