BRRR Is NOT A Legitimate Strategy

[Matthew Irish-Jones]

Please note: All grammar issues, misspelling, and stream of consciousness writing is to prove this is 0% AI generated. 

The BRRR is not a legitimate investing strategy.   In particular it is NOT a legitimate strategy for:  New Investors, out of state investors, under Capitalized investors, unsophisticated investors.... Why?

1. You Don't have access to off market deals.  If you do have access through a dime a dozen wholesaler, you don't know whether its a good deal or not, so its irrelevant. 

2.  You don't have in house Construction. 

3. You don't have enough volume to get a good rate from a GC, or enough street credit for him to waste his time quoting

4. You don't have enough time to analyze up front acquisition, rehab costs, create a scope of work, and project rental rates.  Agents can't accurately project rehab costs.  GC's don't run around providing 10 quotes for investors that might want to buy some day. 

5. You have no competitive advantage. 

A BRRR is NOT a Legitimate Business Strategy... It is a MACHINE that has to be built. 

1. You need a Wholesale company or to be a large client of a legitimate wholesale company (good luck finding a quality wholesale company).

2. You need an in house Construction company with enough back data to provide square foot comps on each respective line item and know what work needs to be done.

3. You need enough volume to get large discounts from subs, material purchases, and other vendors. 

4. You need a team of experts from acquisition, general contractor, property manager for budgets and rental comps, and a financial guy.  

5. A machine that does all of the above, is on time and on budget, and reliable is a competitive advantage. 

So what should you do if your heart is set on a BRRRR? Understand that there is absolutely nothing passive about a BRRR. If you are just starting and are trying to piece together a team as a novice, out of stater, or someone without background knowledge in one of the major categories.. you are going to fail.

BRRR is not a strategy it is a MACHINE!

Don't kid yourself that you are going to be able to read about how a BRRR works on Bigger Pockets and go execute the "strategy" in the real world.  

Either build the machine or passively invest in someone else that has. 

[Drew Sygit]

Great post @Matthew Irish-Jones!

You got a Vote from me!

The problem is that BRRRs did work - albeit in the artificial market after the Great Crash.

There WAS double-digit appreciation of sales prices (values) and rents that pretty much allowed ANYONE to buy almost ANY property and "make" money.

All that appreciation was a safety net that hid a lot of mistakes.

That safety net is now gone.

Unfortunately, there are a lot of systems in place dependent on BRRRs to make money.

So, BRRRs are still pushed on newbies as the best way to invest in real estate - w/o the proper warnings.

One of the biggest mistakes newbies seem to be making is chasing appraised value to the detriment of everything else.

So, w/o understanding the ROI implications, they replace EVERYTHING on their BRRRs, also falsely telling themselves they'll recover the upfront costs via less maintenance issues.

I've created a new copy & paste response where I warn newbies that they want to "Maintain to the Market" and wring every drop of life out of CapEx items that don't affect a tenant's enjoyment of their home. Roofs & windows are two of the biggest items I see investors wanting to replace, when all they really need is minor maintenance.