What is the advantages and disadvantages for BRRRR?

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Steve Vaughan · Answer

Oh you mean the BRRSROPS strategy? The S is for seasoning, RO for ripoff fees, PS for pain and suffering.  Do not forget seasoning, costs or pain.

The disadvantage to me starts with how people purchase if not using their own cash.  They are paying for money two times. Some use hard money. Ugh. High cost, more risk and strict timelines.

I bought one with cash June 30th. The cost ($3k, net of pre-paids) of a refi is relatively low but still gives me pause.  The PITA is what is stopping me altogether, even though I'll be able to recover my entire investment.  And my bank knows me well!

Jay Hinrichs · Answer

I sure wish my buy and hold investors that I loaned money to their dads would have saved the day.. I ended up owning 200 plus homes.. from failed landlords..  not pretty..

Steve Vaughan · Answer

Yep, the investor doing volume will get a reasonable per funding fee and you were offering real value.  Not picking on you, Jay ;)  Keeping it real for the little guy.

Most forget that Brandon Turner' s first flip went bad and his HML was about to take his house until his dad stepped in.  Granted this was in the declining market days of late 07, but his 'brought in a partner to save the deal' was pops. That little gloss over p' s me off everytime.

Jeremy England · Answer

Sometimes you can.  Hell I had this property 100 pct turned around in 1 month.  I but the past month was spent messing around with flaky prospective tenants.  I had one family that committed, paid an ap fee etc, was approved, then couldn't come up with the money

Another committed, paid the ap fee and background, then went dark on me, finally he said he bought a house

Another committed, paid the ap fee, paid a deposit, then backed out because they didn't want to commit for a year

Finally got someone who was johhny on the spot about everything and she lives there now paying rent.  But constrution wise, I was done in like 4 weeks.  But I stil have to wait the 6 months to refi.  In this case I probably could have flipped this property, but it also depends on your market

I would have ended up walking away with like 12k after selling costs if I'd a flipped it.  But I'm committed to buy and hold.  I want mailbox money

Jeremy England · Answer

Garrett, unless you are finding deals that you can turn in fewer than 6 months, what's the difference?  Meaning if you buy and rehab a home then put it on the market to sell retail, and it takes 6 months, what's the difference in that and waiting 6 moths to refi?

food for thought.  I recently ran into this road block of the seasoning period, I'm currently investigative other means but I'm probably just going to wait the 6 mths then refi for better terms.

Garrett Pearson · Answer

@Adam Drummond Sweet! That sound like a nice passive income. I would love to do the that but my understanding is that it can be difficult to refinance in less than a year after purchase. I can't afford to tie my capital up for a year.

Jay Hinrichs · Answer

@Steve Vaughan  OK now Steve your taking a direct shot at me and its Sunday …. I made a very tidy living doing BRRR for out of state investors..

us HML have to eat you know..

I will not do them today because I got burned so bad in 08 when no one could refi and they were stuck in my HML..

but that is how TURN key operated pre 08 90% of the folks buying turn key in those days did what you call

BRRSROPS  the reason it worked even with all those fee's the buyers of out of state were still getting a check back in the form of cash out refi money even after paying all those fee's and then they would get rich on the 100 a month cash flow ..  it was not uncommon to get 5 to 7k cash back.. so they would do 4 at once.. yo

Garrett Pearson · Answer

WOW. You had quite a time there with getting a tenant. Glad you finally got one. "I want mailbox money". I like the way you put that. It does sound good.

Garrett Pearson · Answer

@Jeremy England WOW. Thanks Jeremy. I'm sitting here like DUH! LOL. This is why it is good to talk things out with others. I think I have been overly optimistic in thinking that the turn around on a flip would take about 3 months. I think that because I just purchased a home in an area where houses barely hit the market before they are sold oftentimes the Realtors are pre-selling to their buyers' list but that is a pretty small area in the grand scheme of things but chances are that my first property won't even be in that area for that reason. Thanks for the insight.

Garrett Pearson · Answer

That's what I thought. I guess if I can find a really good cash flow deal, it may be worth sinking my money in and waiting for 6 months to pull the money out. It might delay me six month before I am able to do another deal unless I can find some wholesales in the interim but on the other hand, I will be cash flowing for life. I should put some thought into that.

What is the advantages and disadvantages for BRRRR?

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