Best way to purchase rental property when getting started?

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Best way to purchase rental property when getting started?

Rich G.
Member since 2018 · 10 posts · 4 votes

Hi Everyone,

I’m really interested in real estate and have been for a while. I’ve listened to podcasts, read some books, watched videos and I’m eagerer to get started. My goal is to purchase a 2 family and rent out one of the floors. I’m looking for a place in New Jersey not too far from NY. I don’t have a ton of money saved. I recently found a decent paying job that can fund some of my endeavors.

I would like to try the BRRRR strategy. Where I would find a private money lender that can front me the funds for a percentage of the purchase and rehab cost. After that I would like to refinance and pay off the fees and eventually repeat the process.

I don’t have much experience outside of reading about real estate and private money lenders. I’m wondering if i should try this approach or if I should go purchase a property traditionally that’s turnkey?

One of the biggest hurtles for me is crunching the numbers and figuring out the rehab cost. Any advice?

Thanks in advance!

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Most Popular Reply

Joseph Guzzardi Jr
Rental Property Investor · Member since 2019 · 411 posts · 148 votes
5y

@Rich G. Use your golden ticket. And by golden ticket I mean FHA to get into a multifamily property. Yields best opportunity and quickest start to wealth building

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  • Aaron K.
    Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
    5y

    @Rich G. private lenders are tougher to find than you might think especially on your first property, regardless having a good cushion for unexpected repairs is always a good idea.

    1Reply
  • Joseph Guzzardi Jr
    Rental Property Investor · Member since 2019 · 411 posts · 148 votes
    5y

    @Rich G. Use your golden ticket. And by golden ticket I mean FHA to get into a multifamily property. Yields best opportunity and quickest start to wealth building

    2Reply
  • Rich G.
    OP
    Member since 2018 · 10 posts · 4 votes
    5y

    Hi @Aaron K., what about hard money loans?

    0Reply
  • Rich G.
    OP
    Member since 2018 · 10 posts · 4 votes
    5y

    Hi @Joseph Guzzardi Jr, thanks for the suggestion, should I look for fixer uppers or a turnkey?

    1Reply
  • Aaron K.
    Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
    5y

    @Rich G. a hard money lender will usually require you to put more down and charge a much higher interest rate than a bank especially for an owner occupied property. So why go with an option that will most likely be worse. A HML may come in handy if a property needs a lot of work and isn't financeable until fixed, however you will still need money down as your average HML wants to have a secured loan.

    0Reply
  • Rich G.
    OP
    Member since 2018 · 10 posts · 4 votes
    5y

    @Aaron K. Thanks really appreciate the advice! Also, finding the cost to rehab a property, what’s the best way to do that if I’m looking at properties on online would asking a contractor be the best way or is there usually a tool online?

    1Reply
  • Joseph Guzzardi Jr
    Rental Property Investor · Member since 2019 · 411 posts · 148 votes
    5y

    @Rich G. You may not be able to get an FHA loan on a fixer upper as there are certain inspection requirements.

    1Reply
  • Joseph Guzzardi Jr
    Rental Property Investor · Member since 2019 · 411 posts · 148 votes
    5y

    @Rich G. Also regarding hard money loans.. Unless you are partnering with someone, be prepared for much higher rates and fees as you would not have the experience of an investor who has done 7-10 properties. You could be looking at 13-15% plus 2-3 points and likely other fees as well.

    0Reply
  • Rich G.
    OP
    Member since 2018 · 10 posts · 4 votes
    5y

    @Joseph Guzzardi Jr thanks, appreciate the advice. Definitely seems like FHA might be the best option.

    1Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    5y

    It depends on your end goals.  Some people want to work with higher leverage than others.  

    0Reply
  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    Hi @Rich G. House hacking is a great strategy, it is how my wife and I found financial freedom in NJ in fairly short time. We applied BRRRR to our house hacks which now fund our live in fix and flip. Depending on your situation and what you are comfortable doing duplexes are a great way to go.

    973-975-3895
    House Hacking New Jersey563 Reviews
    WebsiteView Page
    0Reply
  • Peter Vander Valk
    Lender · Bloomfield, NJ · Member since 2016 · 65 posts · 36 votes
    5y

    Hi Rich,

    It's great that you are ready to take the plunge and get into RE investing! As others have said, it does seem like FHA would be a great option for you. There is the option to use an FHA 203(k) loan to also fund your renovation budget as well. Feel free to message me. I would be happy to get more into detail about your goals and what options you might have at your disposal.

    Best regards,

    Pete

    0Reply
  • Stacia Privett
    Rental Property Investor · Columbus, OH · Member since 2021 · 1 post · 1 vote
    5y

    @Rich G. Following as I am looking to do the same but I am in Ohio.

    1Reply
  • Account Closed
    Valencia, CA · Member since 2021 · 42 posts · 21 votes
    5y

    @Rich G. I’m reading a good book right now that you might find interesting called “Investing in Real Estate with Low (and no) Money Down” -by Brandon Turner

    2Reply
  • Rich G.
    OP
    Member since 2018 · 10 posts · 4 votes
    5y

    @Shawn Mcenteer thanks! Much appreciated, yea I also agree finding a duplex is the way to go

    0Reply
  • Rich G.
    OP
    Member since 2018 · 10 posts · 4 votes
    5y

    @Chrissy Posney thank you, I will definitely read that book!

    0Reply
  • Rich G.
    OP
    Member since 2018 · 10 posts · 4 votes
    5y

    @Stacia Privett, awesome 😄

    0Reply
  • Rich G.
    OP
    Member since 2018 · 10 posts · 4 votes
    5y

    @Peter Vander Valk, thank you, I will be sure to do that. I’m actually looking at a property now and would be happy to hear what you can offer

    1Reply
  • Jonathan Leal
    Specialist · Louisville, KY (Louisville) · Member since 2021 · 29 posts · 10 votes
    5y

    @Rich G. By asking here on bigger pockets you are already taking the right steps. Networking is key in this business. I am a full time wholesaler here in kentucky. I also help beginner inverstors that BRRRR by leading them to killer off market deals. Oftentimes they need resources such as carpenters, plumers or even hardmoney lenders. Whatever the occasion call for I am there to help. They just ask and I am more than delighted to lead them in the right direction. I like to consider myself a full service wholesaler. Making a win win win for all parties involved. I am certain that there is a wholesaler in your area that will be more than happy to help. Keep up the networking!!

    0Reply
  • Aaron Jackson
    Rental Property Investor · Waxahachie, TX · Member since 2021 · 4 posts · 1 vote
    5y

    @Joseph Guzzardi Jr

    Correct. The appraisal has to come back “As Is” with no cost to cure.

    0Reply
  • Manish Shrestha
    Specialist · Louisville, KY · Member since 2021 · 1 post · 0 votes
    5y

    Hi @Jonathan Leal

    How are you?

    I live in Louisville kentucky and i'm trying to enter in Real Estate market. I hope you could give me some idea.

    Could you please give me your email address?

    0Reply
  • Jonathan Leal
    Specialist · Louisville, KY (Louisville) · Member since 2021 · 29 posts · 10 votes
    5y

    Yes absolutely, I will send you a DM

    0Reply
  • Mohamed Mahmoud
    Real Estate Agent · Lexington, KY · Member since 2017 · 8 posts · 3 votes
    5y

    @Jonathan Leal hello Jonathan, I live in Lexington and I would like to learn how to wholesale if you don’t mind teaching me!

    1Reply
  • Jonathan Leal
    Specialist · Louisville, KY (Louisville) · Member since 2021 · 29 posts · 10 votes
    5y

    @Mohamed Mahmoud , Thank you for think of me for this opportunity. But currently I am working on multiple projects and will not have the time to give you the attention you deserve to be able to teach you or mentor you. I would still like to add you to my network. I will send you a DM.

    0Reply
  • Stan Holmes
    Rental Property Investor · Elizabethtown, KY · Member since 2017 · 45 posts · 16 votes
    5y

    @Peter Vander Valk I'm here in Kentucky and looking to purchase more property and interested in the 203(k). What episode on BP talks about this. I have a multifamily opportunity on the table and looking for then funding.

    1Reply
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