BRRRR Vs Flip - I have read other posts but this is a diff qs

BRRRR - Buy, Rehab, Rent, Refinance, Repeat

BRRRR Vs Flip - I have read other posts but this is a diff qs

Investor · Miami, FL · Member since 2020 · 4 posts · 1 vote

Hello everyone I hope you are all staying safe ! :)

I am new to BP although I have watched almost every podcast episode.

My name is Tatiana Sanchez and I am just getting started with real estate investing.

I have done substantial research on the BRRRR strategy and I would LOVE if you experts could help me understand something.

I am brainstorming if I should enter the "Buy and Flip" world or pursue the BRRRR strategy.

I am well aware that the numbers will always vary depending on the deal and many other factors, but as a rule of thumb, or an industry average, if I am correct, one would take roughly about 6-10 years to earn the same amount of money on a BRRRR deal, than on a Flip if we consider the numbers on the same deal?

Based on several scenarios that I've found online, if i could for example earn $30,000 on a Flip, yet on a BRRRR deal on that same property i could earn $350 passive cash flow, it would take me:

30000/350 = 85.7 months or 7.14 years to net 30k in rental income.

I understand that I should also be considering tax advantages by expensing depreciation on the properties, as well as property value increasing and not having to pay so much taxes on a Flip, but just looking at the net income part, does it really take that long or I am missing something here?

I would really appreciate some examples.

My goal is to earn passive income, so I know BRRRR would be the strategy to pursue but once I realized how long it would take to earn the same amount of money that I would in a 3 month flip its making me go back to the drawing board.

Thank you all very much in advance! :)

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Member since 2016 · 79 posts · 134 votes

6y

It seems biggerpockets podcast investors including Brandon and David are all employing multiple real estate income generation methods. BRRRR is just one of the strategies. They do wholesale, flip, BRRRR, and buy and hold on a larger scale. Then they also generate more income by teaching classes, selling books, youtube, podcast, etc. etc.

So I think trying to figure out which one method is superior is perhaps missing the point. All these methods have pros and cons, and you can spend the rest of your life trying to analyze them and debate on them but still can't come to complete confidence that one is better than the other.

A few general guidelines that are preached by countless successful people:

1- generally, growing assets is more important than growing income - though without a steady and sufficient income you are risking losing your assets due to credit and market risks. At the end of the day, it's the amount of assets you own that define your wealth, not your monthly income.

2- diversification is one way to control risks but not able to eliminate them - multiple income stream, multiple strategies, multiple partners, other asset class investment are some of the examples

Am I missing something?

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Whitney HuttenPro Member
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
6y
Why not do both? If you can find 3 homes like the one you are hypothesizing, then keep two and flip one. Flipping and BRRRR are great strategies to pair up as long as you can stay focused on putting the larger gains back into the business to grow it.
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Richard Watts
Investor · Southern Maryland · Member since 2020 · 2 posts · 0 votes
6y
Some properties may flip well, but may not cash flow in a particular market. For example, if you had a property that you could purchase for $200K, spend $50K to Rehab, but has an ARV of $325K, it would be good flip. However (using some reasonable assumptions for closing, interest and holdbacks) you would need generate ~ $2125/mo in rent (post refi) for it to cashflow at just $200. If your market won't command that sort of rent, then you are better off to simply flip it.
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Evan Polaski
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@T Sanch, as mentioned your goals matter. However, being in the BRRRR forum you will obviously have a lot of BRRRR fans.
Having done both, I think they both make sense. Right now, in most markets, BRRRR does not make sense. The appreciation you can achieve in the rehab will not let you cash out all of your equity in the deal to perpetually continue the process. I am sure there are deals that this can happen, but I haven't seen them. And then you cashflow is hurt, so having $350/mo of true free cash flow is unlikely.
Secondly, I would argue that BRRRR is not a passive income stream. It can be, until it isn't. And in my experience if you are not actively managing your manager, they will walk all over you. Plus to compare a flip and a BRRRR, the BRRRR is always MORE work. Both will in theory have the same amount of work to buy and rehab. But then you sell one or you keep and have to manage in some form the other.
Finally, as others mentioned, flipping is a one and done deal. But to make it comparable, you have to look at BRRRR the same way. If you are comparing multiple BRRRRs to one flip, it is not a fair comparison. A true comparison to me would be adding one BRRRR per year, to doing 1 flip per year.
At the end of the day, I am a fan of flipping right now. I used to think that BRRRRs were better, and my wife asked why I didn't just flip these properties and make more. I said, I will have a tenant and income forever as a rental. Which was true until a roof replacement wiped out over a year of profit. Or a new HVAC system, or a kitchen remodel to keep rents up to market. With a flip, you do it once and make your money (assuming you make money). Then you just sit around and wait for the next and repeat.
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