All Forum Posts by: Gil Segev

@Stone Jin Thanks for the insights. I am sure there are properties in the Phoenix market for which BRRRR works but so far I have not seen any deal with a purchase price below 70% (we actually need to hit the 50% mark if we want to rehab and pull our money back out).

in his profile page, @Shiloh Lundahl mentions a coaching program and says: 
"This type of coaching would not be as valuable for someone wanting to learn how to wholesale or someone wanting to invest in expensive markets (over 150k medium home price) or someone without a current income"

I guess this reinforces my assumption that in such a hot and expensive market such as Phoenix, making BRRRR work is this much more difficult than in cheaper markets, right? 

@Eli Schwartz Thanks for the answer. Agree that you have to stick to your math. What I'm asking is how to improve my odds of finding good deals assuming I am looking for new markets to go into anyway. 

Hi all, I am sure this question has been asked many times before but I am struggling finding a satisfactory answer.. What makes one market more suitable for BRRRR investing than another?

I understand that this is an all-cash investment so obviously you are limited by your cash/financing reserves but I dont think that's the whole story.

I've been analyzing deals in AZ lately where the market is pretty hot and no matter how many wholesalers I work with and how rough the state of the property is, I can't seem to get even close to making the BRRRR math work. Wholesale properties get sold 50-70k under ARV on a 250-300k house which is just not a big enough spread.

So my question: how does one identify a market with a higher potential to support BRRRR with B/C class properties?

@Brian Watts Very cool! Congrats!

How much did the rehab end up costing? I'm analyzing deals these days and trying to guesstimate rehab costs.

Generally speaking, I'd expect floors, paint and appliances to come up to more than 15k.

@M. Anthony Contrascere

Your original loan assuming 20% down is 279.2k so if your refi loan is 300k, you have 300-279.2k left to cover your cash which come up to 20.8k. You have more than this in the property so you will be leaving cash in it.

If I understand it correctly, you need to be at~70-75% of the ARV with all money in the property after rehab is complete. In your example above:

You buy for 349k and put 20% down so 69.8k cash + 279.2k loan + 35k rehab and closing (104.8k- 69.8k). All in you are 349+35k=384k into the property. In order for this BRRRR to work and for you to collect all your down payment + rehab + closing, you need the ARV 512k (384k/0.75).

If your ARV remains 400k, you will be able to get 300k refi loan (0.75*400k ARV) which would cover 279.2k of your original loan + 20.8k of your out of pocket cash and leave 84k of your cash in the property.

Hope this makes sense. 

@Andrew Postell this is super interesting! One of the things I was most concerned with before going into my first BRRRR were holding costs associated with hard money and the risk of rehab taking longer than projected. Being able to use traditional financing from day one could definitely mitigate at least some of this risk.

@Andrew Postell you say that we borrow 75% of the ARV when we buy the property. I am assuming banks won't lend 75% of a future ARV but rather lend against the current value or purchase price of the property.

In this case we need to go to HML who would lend against ARV for the initial loan.

What you are saying then is that if I borrow from a HML to buy and rehab, I won't need a seasoning period before I refi with a bank as soon as my bank rehab is complete?

@Jim K. you're making very good point there. 

I have managed several rehabs locally and one OOS before. The local rehabs were tough, stressful and over budget and the OOS rehab was horrific with a sub par contractor who left me 30k down and ran without completing any of the work. It took me 3 months to find another contractor and another 30k to get back to were I needed to be but the upside is that in that area, I now have a contractor I trust. Problem is, I can't find any deals there :(

I am by no means veteran but I am walking into this eyes wide open. I live in CA where properties are not likely to drop to a level I can afford anytime soon. I can sit and wait for it to happen or I can go out of state, risk a ton of money, fail, curse, almost give up a bunch of times and hopefully recover and come out with a team I can trust. 

I'll be very happy to hear from others who are willing to share their experience BRRRRing out of state. from where I am today, it seems the only way forward is OOS. 

Thanks @Andrew Postell. I think I get it now. I'll start working with a HML after I run some properties and numbers in my desired investing location.