Investor · Mission, KS · Member since 2016 · 42 posts · 22 votes
I'm struggling with my next move and strategy. Should I continue with the BRRR strategy or simply leverage my next properties. My current situation. I bought 6 doors all cash. These units are in Kansas City. 50k to 70k range. I managed to refi some units. I'm about to refi the rest of the portfolio very soon. I'll have about 150k to invest and I'm keeping the rest for reserves. I like the brrr strategy but these lower class units come with problems. I'm wanting to move up a class to the 100k units. So should I leverage five 100k units? Or buy three or so more cash deals and brrr? BRRR keeps my money liquid but lower class. Leverage Everything puts me in a nicer class. Either way I run out of money soon. Simply looking for advice and perhaps another set of eyes to see things differently. Thanks
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.
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.
True. I haven't began exploring other peoples' money yet. I'm really struggling with using up all my conventional loans in lower class vs. better areas as well.
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.
@Andrew Syrios I agree. I guess I should add that I'm looking to scale asap. To simplify what I'm trying to say: I'm torn between leveraging 4 - 5 units, then I'm cash poor for a little while. Or buy 3 cheaper units and brrr. Or buy one one 100k unit and brrr. Decisions decisions.
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.
@Shawn Clark Thanks for the input, great advice. I'm using a property manager currently. I too experienced difficulties and found myself low on cash reserves. I'm setting aside plenty of my refi money for reserves this time.
@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.
@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