Critique my BRRRR strategy
Spencer SturgillPro Member
Investor · Madison, WI · Member since 2024 · 20 posts · 5 votesCritique my BRRRR strategy
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Member since 2025 · 104 posts · 37 votes
8moYou may have trouble with an owner occupy loan if it's too distressed. Look for something that is outdated cosmetically but still livable. If you have a good Realtor and Lender, they should be able to guide you through it.
17 Replies
- Member since 2025 · 104 posts · 37 votes8mo
You may have trouble with an owner occupy loan if it's too distressed. Look for something that is outdated cosmetically but still livable. If you have a good Realtor and Lender, they should be able to guide you through it.
- 8moWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
Congratulations on getting a duplex! It is an excellent first move that puts you ahead of the majority. I am pretty sure that if the deal and the figures are right, local banks, portfolio lenders or even private lenders might be able to work with you quick. But, I think hard money might be more difficult without a background.
Good luck!
NETWORTH BUILDERS5236 Reviews - 8moAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Spencer Sturgill glad to see you have started! Owning real estate is very hard - and it's only getting harder! Now, it is true that most hard money lenders (HML) want to see some type of experience but that doesn't mean you won't find any to lend to you. It usually means that they will lend you LESS money that someone with experience. Don't get me wrong...some won't lend to you...but there are many HMLs out there and someone will lend to you. Keep in mind that HML won't lend to you on your own, primary home. So, if you are doing primary home strategies (which is a good strategy to use) they won't lend to you because they can't lend to primary home transactions.
And as mentioned above, there is nothing wrong with buying a home that needs no work at all. I would not discount buying homes like that. Just buying a "move in ready" home and saving the money you would use to fix up a home for your next purchase works well also. Just something to consider.
When buying my primary home, I do pledge to live in it for 12 months (it's actual paperwork that you sign). So, if I go to buy ANOTHER primary home before the 12 months is up, the next lender will ask why you are doing this. Unless it's for a job transfer or something along those lines, you can't get another primary home loan. Once you hit the 12 month mark, then you are ok to proceed. So, doing this every 12 months is about as quick as you can do it. When buying investment properties, you can do that every day of the year.
Hope that answers your questions some. Thanks for the post!
- 8moFrank PyleBusiness MemberSpecialist · USA · Member since 2024 · 279 posts · 130 votes
Your plan is realistic, but the biggest tripwire is the refi side, not the purchase. Most people assume they can force value in a year and pull most of their cash back out, then they find out the appraisal comes in light or the lender wants seasoning, or the rent history is thin, so the takeout is smaller than the spreadsheet. I would underwrite it with a conservative after repair value, a conservative rent, and assume you only get 70 to 75 percent loan to value on the refi, then make sure the deal still works if you leave more money in.
On doing it sooner, you do not need hard money to buy a fixer owner occupied. You can look at FHA 203k or Fannie Homestyle which will roll rehab into the loan, or a local bank portfolio loan if you have strong W2 and reserves. Another path is private money from someone you know for the gap, paired with a conventional owner occupied purchase, but the paperwork needs to be clean so it does not blow up underwriting.
If you are single and willing to take some pain, the fastest repeatable move is often another owner occupied deal once you hit the one year mark on the duplex, either a small multifamily or a rougher single, and keep your rehab scope tight and boring. What are your current income, cash reserves, and rough credit score, and in Madison are you targeting a true live in rehab or something mostly cosmetic?
- Specialist · NJ · Member since 2022 · 1k+ posts · 650 votes8mo
Don't do anything until the Duplex is done and stabilized. Then, your assumption about Hard Money is wrong. You essentially have experience now and if your credit is good. You'd be able to get a loan. I've gotten "0" experienced ppl loans all the time. Just have to be willing to take the leverage you're offered.
- 8moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 503 votes
You can get hard money if you have a high enough credit score and clean credit even if you have never done a fix and flip before. Depending on credit and property location you can get up to 90% of the purchase price and 100% of the rehab done on draws. You can also get DSCR loans if buying investment properties. So you can buy with a hard money loan and then refinance the loan into long term rental loan or DSCR loan after the rehab is complete. A conventional loan will have a longer waiting period (called seasoning period) for you to be able to use the new appraised value which is why many investors use DSCR loans since the waiting period is much shorter. That and there's less paperwork for DSCR loans compared to conventional loans.
More on DSCR loans: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Happy to connect to discuss further.
Bright Skyline518 Reviews - 8moJames JonesPro MemberInvestor · Collierville, TN 38017 · Member since 2017 · 620 posts · 454 votes
You’re thinking in the right direction, but a few assumptions are slowing you down.
First, is the plan realistic?
Yes. It’s realistic. It’s also slow and capital-heavy for where you’re at.
Waiting until 2027 to deploy because you're optimizing for the cleanest possible owner-occupied loan is safe, but BRRRR speed usually comes from imperfect capital, not perfect loans.
On lending options sooner:
You don’t need to write off faster options just because you’re new.
What’s commonly available earlier than people think:
• Hard money – many lenders care more about the deal and your liquidity than your BRRRR resume
• Local portfolio lenders or credit unions – relationship-driven, especially in smaller markets
• Private money – often comes from networking, not experience
• Partner capital – sweat equity + someone else’s balance sheet
The key is underwriting conservatively so the refi still works even if costs run high.
The bigger critique:
You’re anchoring too hard on owner-occupied financing as the accelerator. That’s useful early, but it’s not the only lever.
If you’re single, flexible, and risk-tolerant, your advantage is time and effort, not waiting power. You can:
• Take on lighter rehabs
• Do smaller margin deals to build reps
• Focus on repeatable execution, not perfect equity pulls
One clean BRRRR done sooner often teaches more and unlocks more options than waiting years to do a "perfect" one.
Bottom line:
Your plan works. It’s just conservative for someone in your position. If you want to move faster, start exploring deal-driven financing now and let execution, not calendar time, dictate your pace.
- Investor · Madison, WI · Member since 2024 · 20 posts · 5 votes8mo
@James Jones that was super helpful. Thank you.
- Las Vegas, NV · Member since 2018 · 12 posts · 0 votes8mo
First, congrats on the first deal! House hacking a duplex is a solid way to get reps and buy yourself time. Here's a couple of high-level thoughts that might help frame your next move in my opinion:
In regard to lending, hard money isn't necessarily off the table because of experience alone, but it can sometimes shift the risk profile quite a bit. Higher rates, shorter terms, and tighter timelines can turn what looks like an "accelerated" BRRRR into a fragile one if the rehab or refi takes longer than expected.
Now the reality leads to the bigger question of how fast you can do the next BRRRR and how resilient the deal would be if things don't go perfectly. I've seen early BRRRRs work on paper but struggle once you enforce conservative rent, full expenses, and post-refi DSCR.
Waiting while you strengthen your balance sheet and underwriting discipline isn’t wasted time, it just makes the next deal much cleaner and easier to scale from. If a deal only works because you’re stretching timelines, leverage, or assumptions, that’s usually worth slowing down and re-checking, if you ask me.
Curious how you’re thinking about stress-testing the refi and cash flow on the next one.
- 8moTre DeBragaPro MemberReal Estate Agent · Worcester, MA · Member since 2022 · 107 posts · 48 votes
whats up Spencer.
You can realistically get any form of lending outside of the regular owner occupied lending if the deal is great and you have enough to put down. I would look into a FHA 203k loan. They will lend on the purchase and rehab while still being able to put 3.5% down. But, need to live in for a year which I think you planned on doing anyways. - 8moAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Hey Spencer! Congrats on closing your first property and getting your house hack going, it’s addicting once you get into real estate, isn’t it? You’re in a really strong spot to start scaling.
Your plan makes sense and is totally realistic. Using your W-2 to save for the next property, fixing it up, and then refinancing to pull out equity is exactly how BRRRR works when it's done carefully. While you're saving, put that money somewhere it can grow a bit, a high-yield savings account or even a short-term CD works since you won't be investing again until next year. You might even look into investment accounts that allow you to borrow against your own money instead of going to a bank, there's some out there.
The next step is really about building your team. Find a lender who works with real estate investors and can walk you through your options, there are some great ones on here who can help you understand things like DSCR loans (like the lender above) or other creative ways to finance a property without waiting years. The key is finding professionals who help you understand and learn along the way. Then, once you're ready to look at your next property, connect with an agent in your target area, could even be the same one you used for your duplex, to help you find the right deals. And when you start scaling, bring in a CPA who really gets real estate investors. They can help with depreciation, deducting rehab expenses, non-passive vs. passive income and how rental income and losses can potentially interplay with your W-2 income tax, and timing it all. For now, since you're house hacking, just make sure you're tracking rental income and expenses for the rented portion, including mortgage interest, taxes, insurance, and utilities.
Following this approach will give you time to build cash, understand rehab costs, structure financing properly, and keep your taxes optimized. Excited for you, good luck and happy to connect!
INVESTOR FRIENDLY CPA®5241 Reviews- Investor · Madison, WI · Member since 2024 · 20 posts · 5 votes8mo
@Ashish Acharya thank you for your reply!
- 7moMayo GilfurtPro MemberReal Estate Consultant · Connecticut Ct · Member since 2026 · 130 posts · 30 votes
A few things to consider:
Owner-occupied seasoning rules may limit how much equity you can extract at refinance, depending on lender overlays and market appreciation vs. forced appreciation.
If the goal is to accelerate, some investors bridge the first acquisition with short-term capital and refinance into DSCR once stabilized — but that requires tight underwriting and liquidity discipline.
The biggest risk in BRRRR cycles isn't the rehab — it's misaligning timeline, refinance eligibility, and capital reserves.
If you model those three variables conservatively, the strategy becomes much more predictable.
- 7moMayo GilfurtPro MemberReal Estate Consultant · Connecticut Ct · Member since 2026 · 130 posts · 30 votes
Congrats on the duplex — house hacking a 2-unit is one of the strongest ways to enter the game.
Your plan is solid, just conservative on timing. If you're eager to move sooner, you might explore owner-occupied rehab financing (FHA 203k or HomeStyle) so you can acquire a distressed property without waiting years to stack cash. That keeps leverage reasonable while still allowing you to force appreciation and refinance later.
Hard money is technically an option even without BRRRR experience, but for a first project the costs and timelines can create unnecessary pressure alongside a W2.
If you're single and flexible, another path many investors use is sequential house hacking — moving every 12–24 months and converting the previous property to a rental. It's slower than pure BRRRR but very effective and lower risk.
You’re on a strong trajectory. When you get closer to executing, it can also help to speak with lenders early to understand what programs and timelines you’d realistically qualify for — it makes moving quickly much easier when the right deal shows up.
- 4moDenise WebsterBusiness MemberFinancial Advisor · Albuquerque, NM · Member since 2014 · 82 posts · 30 votes
Spencer, I think some of the earlier replies gave solid advice regarding livable properties and avoiding overly distressed first deals.
I would add that one of the biggest misconceptions newer BRRRR investors run into is assuming the refinance phase is automatic if the rehab goes well.
The refinance is where a lot of deals either become scalable — or stall.
A few things I would stress-test before moving forward:
- What happens if the appraisal comes in below projected ARV?
- What if rehab costs increase 10–20%?
- What if the property takes longer to stabilize?
- What if rents come in lower than expected?
- What if the DSCR ratio becomes tight because of taxes/insurance/rates?Those variables matter because BRRRR is really a capital recycling strategy, not just a rehab strategy.
Regarding hard money:
You may still qualify even without extensive BRRRR experience if:
- the deal has enough equity,
- the rehab scope is reasonable,
- reserves are sufficient,
- and the exit strategy is clear.Many lenders care as much about the deal quality and liquidity position as pure experience.
One thing I would encourage is building the refinance assumptions conservatively from the beginning:
- use realistic rent,
- realistic taxes,
- realistic insurance,
- and realistic post-repair value.If the refinance still works under conservative assumptions, the deal is usually much safer.
I also think newer investors benefit from understanding draw structure before closing:
- reimbursement draws,
- inspection timing,
- contractor payment sequencing,
- and liquidity gaps between phases.A project can be profitable on paper and still become stressful if cash flow timing is not planned correctly.
For a first BRRRR, I would rather see a cleaner, lower-risk deal with a reliable refinance path than a highly distressed property chasing maximum spread.
- Member since 2026 · 15 posts · 4 votes4mo
Spencer, your strategy is functionally sound but you are exposing yourself to a MASSIVE variable: Interest Rate Risk.
You are planning an owner-occupied conventional loan. That's cheap debt. But if you try to force this faster by using Hard Money or a DSCR loan without experience, your holding costs during that 1-year rehab will bleed you dry.
More importantly, if you wait until 2027 to buy and rehab, you won't refinance until 2028. Do you know what the take-out loan rate will be in 2028? Nobody does.
The biggest mistake beginners make is calculating the ARV but failing to stress-test the back-end refinance. If you pull your equity out at an 8% rate down the road, your Debt Service might completely wipe out your rental income. Stay patient, use the cheap W2 owner-occupied debt, but before you close, run a stress-test matrix to ensure the property still cash flows even if refinance rates spike.
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