Real Estate Agent · Dallas, TX · Member since 2017 · 136 posts · 141 votes
How did you transition from 20% down on turn key/mostly ready properties to BRRRRing and/or any other sort of buying off market deals cash? Given my market, Dallas, every time I save 40kish my first thought is let’s get pre approved for another rental!
1.) Did you guys just sit around until you saved up enough to afford a property + repairs in cash?
2.) Did you kick it off with a hard money loan? (Seems risky for FIRST BRRRR)
3.) Did you buy a bunch of 20%ers until a couple appreciated enough to sell/cash out refinance?
Rental Property Investor · Carrollton, TX · Member since 2013 · 750 posts · 538 votes
6y
I went straight to BRRRR and have used the hard-money route throughout. If you are working with a good hard-money lender, they will be part of your team and will be a great sounding board to make sure the deal is a good one...if anything, having that extra set of eyes on the deal is less risky in my view. Plus if you are buying right, with a good spread to where it makes sense to even use hard-money, you should have a decent equity cushion to absorb minor missteps.
Rental Property Investor · Carrollton, TX · Member since 2013 · 750 posts · 538 votes
6y
@Joel Lopez - that is what a lot of investors do. Buy with hard money, either because a fast close is warranted or to address property condition, often both...do the rehab, then rent it out and do a rate-and-term refinance from hard-money into long-term conventional debt. Then wash-rinse-repeat. We are in and out of the hard-money in around 2-3 months, depending on the level of rehab needed. Depending on your buy/rehab to ARV spread you will have more or less money in the deal at the end of the process.
I have used any number of hard-money lenders over the years, but have been working with Investmark Mortgage, based here in DFW, since 2016.
Custer, SD · Member since 2016 · 14 posts · 4 votes
6y
@Ivan Loza, thanks for starting this thread! Any turnkey companies you'd recommend? I'm planning to buy properties throughout the country to diversify my markets, then BRRRR in the few markets that show the most promise. Or bring the cashflow to my own market if we see a correction.
Real Estate Agent · Dallas, TX · Member since 2017 · 136 posts · 141 votes
6y
@Jeff Rich I’ve never used one actually. I just find the houses myself. I’m realtor and my brokerage is partnered with a property management company if you’re interested in the Dallas market.
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
6y
@Ivan Loza
I've done both. My first 4 properties in the DFW were with 20% down cash flowing about $200-$300 a door with 15 year loans. Then I did my first BRRRR paying cash (48k) for a property in ft worth last year. I paid for the rehab with savings and cc loans. It's worth 150k now, but I haven't done a cash out refi on it yet. It's netting me $1,200/month right now. My second BRRRR was in Grand Prairie last summer. I pulled equity (146k) out of my first property I bought 5 years ago and paid cash for a 4-2 SFR for 135k. Spent 25k on a complete rehab and it got appraised for 215k. I then pulled out 150k cash from it on a cash out refi to snag another house for cash. Then a couple months later did another cash out refi on that house to snag another one in Grand Prairie for 75k cash. And I just signed a contract yesterday to buy a 4-2 in Arlington for 125k. I'll finance this with 20% down. Pay for the rehab (20k) with credit card loans, then do a cash out refi later on. ARV on this one is 215k.
So I’ve done it a few different ways and find this area hot and in demand for rentals. However, when I made cash offers, I got really good deals. When I financed them with 20% down traditional loans I didn’t get as good as deals.
Real Estate Agent · Dallas, TX · Member since 2017 · 136 posts · 141 votes
6y
@John Morgan thanks for the detailed walk through of your successes. Hearing those numbers, locations and strategies fill me with optimism because it all sounds very achievable with time.
Similarly I plan on getting 20%ers that need some fixing until one appreciates enough that I may take loan out on equity or sell and invest that capital + savings into a cash offer.
It seems like business really takes off after the first BRRRR. Dallas is indeed booming for rentals and it seems like they keep going up in value all over the metroplex
@Andrew Syrios just a small nit but for BRRRR to be really effective, you want to be all in at 70-75%. This includes closing, holding, rehab and refi costs.
It would definitely include holding, rehab and closing costs. Refinance costs are something else IMO (since it's not part of purchasing and rehabbing the property). But you would still need to account for them. To completely BRRRR out then, you would need to be all in for more like 73% to make up for the refinancing costs. But the dirty secret of BRRRR is that you often don't completely BRRRR out. You can and we certainly have. But it's not a sure thing. Since if you were flipping, it would just mean a slighly lower profit, it's not a huge deal. But with BRRRR, you would need a little money to make up the shortfall, so I recommend having some money on hand if you're going to try to BRRRR. Otherwise, it's probably better to flip a few first to build up some cash reserves.
@Andrew Syrios that’s one route I’m considering. However I’m aiming to wait a couple more years to boost my credibility first
Good deal, but be careful with "waiting." Oftentimes, the waiting never stops. I would keep your ear to the ground now for potential private lenders and start talking to people. You very well might find one before you would have otherwise expected to.
It would definitely include holding, rehab and closing costs. Refinance costs are something else IMO (since it's not part of purchasing and rehabbing the property). But you would still need to account for them. To completely BRRRR out then, you would need to be all in for more like 73% to make up for the refinancing costs. But the dirty secret of BRRRR is that you often don't completely BRRRR out. You can and we certainly have. But it's not a sure thing. Since if you were flipping, it would just mean a slighly lower profit, it's not a huge deal. But with BRRRR, you would need a little money to make up the shortfall, so I recommend having some money on hand if you're going to try to BRRRR. Otherwise, it's probably better to flip a few first to build up some cash reserves.
Couldn't agree more! While pulling all of the cash invested out is a the goal, high ROI on the cash left in the property (or financing for that matter) would also be acceptable for me.
I actually just started a flip to build some additional cash reserves before starting to BRRRR.