I have about 40k saved up and I am ready to invest in my first property (so I think). Im confident in finding the home, completing comps, etc. (I'm also a real estate agent). Can I get started using the BRRRR Method with only 40k? Im planning to purchase a home for around $120k or less. If so how do I come up with the remaining funds? Do I us a hard money lender or a line of credit? or does the BRRRR Method only work with cash and private investors? Any guidance would be graciously appreciated!
Hi Erica - Congrats on saving enough for your first investment property! If you have access to a HELOC, I would use that over a hard money lender any day. I funded my first BRRR using a HELOC and it worked like a charm! I am sure you know the rates for hard money. Insane! I have used that too, but only because all of my other funding what locked up and I found a deal I couldn't pass up. Wishing you tons of success!
@Melissa Uppelschoten I forgot about this option. I thought it only works if you are taking a HELOC loan out on your own home that you own and not on the investment property itself?
@Erica Garvin Sorry, I misunderstood. When you mentioned Line of Credit, I assumed it was on your primary residence. I only have experience with a HELOC on my primary residence.
@Erica Garvin using a hard money lender would probably be the easiest way to do this. First you need to find a property that after you buy it and rehab it, the total amount of money that you have into it, including your rehab dollars and the hard money loan, is only about 75% of the market value. You will likely have to wait a little while too in order to allow the property to season before you can take out a loan for the 75% of what the market value is. But that is basically it. You find a tenant and screen them and start the refi process.
Here is an example. I bought a property about a month ago for 70k with a hard money loan for about 60k. I am going to put about 30k into it to fix it up and then it should be worth 130k when I am finished. If you include the closing costs and the hard money payments, I will likely be into the property about 80% of the value. But then I'm planning on doing a lease option to sell the property which should bring back to me about 4K for the option fee so really I'll be in the property about 2k - 5k when all is said and done with what I call BRRRLO strategy (BRRRR + Lease Option).