BRRRR doesn't have to be done with cash. It could be done with hard or private lending. Just has to be at a deep enough discount so you can do a cash out refinance once the rehab it done.
Leverage for the highest returns. OPM is always the highest return investment method.
Cash is the lowest return most conservative form of investing.
There's nothing about BRRRR that means you have to buy lower class units. It just means you need to buy with enough equity that you can refinance out what you put into the property when you're done fixing and renting it.
Are you using a property manager or self managing? If you are self managing then quantity (and quality) of units comes more into play. More to deal with. More risk of maintenance issues. And if you renovate yourself then you know what you are getting and have "instant" equity. I'll never buy someone else's rehab again. Too many unknowns.
Leverage cuts both ways. So watch that. Leverage is best in good times but worst in bad times. (And by "times" I mean for the property too, not just the market. I had 4 out of 6 turnover within a 6 month period and at one point 3 were vacant simultaneously. That was followed a year later by back to back sewer collapses at two of them.)
Summary: Scale in a way that let's you sleep at night and (hopefully) still reach your goals.
@Jason Fike I agree with what others are saying. BRRRR and higher end properties are not mutually exclusive. There are a lot of lenders that will finance acquisitions and rehabs. You just need to be sure that you can force enough equity through the renovation that will leave you with around 25% equity that you will need to refinance. I think you're wise to move up in class. We do a lot in Kansas City in this price range and it's a nice sweet spot.
@Jason Fike did you make a decision yet? I'm in the exact same situation. This is a great post.
@Rafael Brown Yes, I managed to refi 3/4 of my portfolio with a local credit union. Now I'm looking at some mid-level flips. This keeps my money liquid. Then I'm going to focus on a pre rehab deal with an arv of 100k, purchase with cash then refi. Basically flip mulitple units, then buy and refi. Repeat.
At least that's the strategy at the moment. It tends to change from week to week. lol
I think that is a terrific strategy. We’ve done things that way, too. Flip, flip buy and hold a pretty house...rinse and repeat.