Hello all I am brand new the the investment game and am trying to educate myself on the best way forward. I currently have about 10k saved for some for if investment. Eventually I want to employ the brrr strategy but am not sure how to start, should I finance a flip to build capital until I can by a property and rehab it out right?
sincerely, Hungry investor
Ethan if you already have $10K saved you can always start with a modest first investment. Some basic questions:
Do you own your own home with Equity - If yes you could tap into that with a cash out refinance to add to the $10K
Have you considered buying a second home if you do own a home less money down (10%) which can still be used as a rental 6 months out of the year or after 6 month just convert to a full time rental.
Have you been pre-approved or had a bank/lender review your income and credit to see if you can get a mortgage on either option.
Once you buy a home investment or secondary you can always take out a line of credit to do renovations/repairs etc.
In order to get the ball rolling I would advise on the above options to get your next (90) days mapped out.
@Ethan Snyder , a BRRRR is a flip, with much tighter margins. BRRRRs only really helps you get ahead in the short term if you are able to pull all your cash out and then some, while still cash flowing on the rents, and another deal to repeat with.
With either a BRRRR or a flip, $10k is not much money, and you can easily blow through that with a single missed item (sewer line, roof issue, etc). Therefore, if it were my, I would focus on saving more, and looking at some flips that only require cosmetic work.
10k is a great start! Kudos to you!
Keep in mind that when doing a BRRRR, eventually you are going to have to go to a lender to execute the refinance. In fact, I would START with finding a lender and explain to them what you are planning to do. Spell it out for them best you can. You do not want to get into a deal and then start reaching out to lenders only to discover none of them will lend on the deal.
Most lenders are going to require you have 3-6 months PITI (Principle, Interest, Taxes, Insurance) in the bank in order to qualify for the cash out refi. While you might be able to generate enough forced appreciation with a rehab, you'll likely being borrowing funds from a hard money lender to cover the cost of the initial purchase, the rehab, and the holding costs.
Not saying this can't be done, but you may have to get creative. Do you have access to any sort of line of credit like a HELOC? That's how we funded the purchase of two BRRRRs.