All Forum Posts by: Lee S.

I've done this a couple of times but had private lender (family) lend me 100% of purchase price on both (I covered closing costs) at 5-7% and gave them a trust deed on the purchased home.  I then rehabbed with my own funds and waited my 6 months (refinancing 2nd one right now).  One thing I also learned is to start the refinance process early, around month 4 so you can close as close to 6 months as possible.  I bought both at 60-70% of as is value so their money was "safe".

The other way to find private lenders is when your speaking to other investors about purchasing their homes for sale. I simply ask them what they plan to do with the money and feel them out. I've had multiple other investors say yes, found one just a few weeks ago. These are the best lenders because they understand REI.

This is the only way to purchase SFR's imo (BRRRR).

I also have hard money lined up at 2 pts and 10%, not horrible.

@Brett Dawson I get that things happen, my issue was on the last job they just stopped showing up because they had another job happening at the same time.  These are guys I've known for years also.  It's amazing how much hand holding is needed also, like they don't see obvious things that need to be done like electrical etc.  

@Brian Garrett got it all out, could have taken additional money out as I had room to spare.  Same plan with the 2nd, I'm 90% confident I'll get all my money out.  I don't want or need the extra cash out, prefer to have the property cash flow better and pay it off sooner.

could have sold my first two "flips" but kept them as rentals.  Could have sold first for ~100k profit (160k purchase and rehab) and second for ~60k (140k purchase and rehab).  My goal was only 30k each, I think I did all right.  I've got an opportunity to get consistent 20k returns in a different area which I think I'm going to move forward on while I keep looking for local deals (very hard to find). 10-20 flips a year at 20k isn't bad I figure.

Don't care what the returns are in Ohio, there isn't enough money as they say.

it's good to have multiple exit strategies. My first BRRRR started out as a flip but I knew I could potentially refi and keep if things went well. The only issue with this method is I would have used slightly different materials if planning only BRRRR but in the end I have a nice rental that people will fight over when vacant.

Numbers:  purchase for 95k, 65k all in rehab, closing costs etc.  appraised at 230k.  Lenders will do 75% ltv and also do 75% of rent as income if new to rental game.  It is not difficult to find these lenders.  One thing I'm noticing is appraisers are coming back low, I briefly listed this house at 270k and had interest, no way it was worth less than 250k based on comps.

I've got a 2nd BRRRR in motion right now, numbers are a little tighter but I should be able to get 100% out. Realize that even if you miss by a little it's still better to have 5-10k of your money in a deal than 50k+. Just be aware that this can happen and finance the purchase and rehab accordingly so you're not stuck with a high interest loan.

@Account Closed not reading all of that. Point was made very clearly, in sure you just threw in more negative hypotheticals for the BRRRR while completely ignoring similar risks buying turnkey. Not interested in debating the strawmen and moving goal posts.

@Account Closed just wow, there you go again tilting the playing field in an attempt to make your method appear to be superior.  No need for all the dancing, I'll break it down super simple for you ok?

Two exact houses, each worth 200k when ready to rent and rent for the same amount.  We will exclude closing costs to keep the math simple so you can follow along.  

Your Method, Put your 25% down.  You're now into the home for 50k.

My method (True BRRRR) I buy the house for 100k, put 50k into it (including 2nd closing costs, carrying costs, and whatever other nonsense you want to come up with), refinance out the entire 150k. I'm now into the house for ZERO!!!!!!! Can I say that any more clear? Do you need pictures?

Now, we can put both houses into your long term passive model above and guess what we get?  The exact same thing.  Ah, but guess what?  Just to keep it simple I take my left over 50k and invest it in the stock Market at 7% average return.  My returns CRUSH yours.

You can go ahead and make up all kinds of nonsense like you did in your last post. Guess what? You could buy a Turnkey and immediately have issues also that you didn't see pre purchase right? Should I throw in a ridiculous hypothetical and say "and we all know that turnkey renters trash houses 10x as badly as those that rent BRRRR homes'? NO? Because that is how ridiculous your argument is.

Oh, you say this strategy can't be done?  Already done it twice, as have countless others on these forums.  I have locked in equity?  So do you, except it's your hard earned cash and for me it's nothing, I can tap it or not in the future by selling if I want but my strategy is long term hold so it's IRRELEVANT.  What's my time worth?  Hmm, on my last one I put maybe 5 hours into the house, I'll take that pay rate (50k compounded over decades at 7%).   Contractors did all the work.

Do yourself a favor and read this post slowly and carefully and do not respond, you're embarrassing yourself.

@Account Closed it seems you are unaware of what the 2nd R stands for in the BRRRR strategy. It stands for RENT, therefore your example of short term price fluctuations hurt the BRRRR strategy is wrong, it's a long term rental just like a turnkey, it's not a flip. My point was that selling for a profit is an OPTION with a BRRRR but is not with a turnkey.

As for the financing, if you can get a purchase loan for a turnkey, you can get a refinance loan for a BRRRR. If you work the numbers right you also have a 25% cushion built in, meaning you could be off by 25% on ARV and or rehab costs and be no worse off than having just bought a turnkey from the beginning.

It seems you don't get these concepts. If you're happy coming up with 25% everytime you buy a property then go for it. However, Basic math says that doing it that way is significantly inferior to the BRRRR strategy. You also continue to skew the facts in order to make one strategy seem more favorable or less risky when in reality these facts are irrelevant because they are the exact same for both strategies. Run your numbers again with the BRRRR strategy having left no money in each house and instead investing that money in the market at 7% annual return. Oops.

So let's agree that the person contemplating either strategy is looking in the exact same neighborhood for both, has money for a down payment, and has good credit (will need it either way), both will be kept as long term rentals.  Now, argue your method is actually better based on the math instead of tilting the playing field irrationally.

@Account Closed I disagree a little bit with your #2 point. Economy is irrelevant if you're choosing to buy turn key or do a BRRRR, either property will be hit in value. If you're trying to decide between the two, it means you have enough money for the down payment on a turnkey. Neighborhood is also irrelevant to the argument, you have to assume same class of neighborhood for both to make a comparison. You cant compare the two and assume the BRRRR is in a war zone and the turn key is in an A area, in fact, I think most turn keys are in lower class neighborhoods and you can get yourself into a higher class neighborhood for less by doing a BRRRR.

What happens if I buy a BRRRR and I miss my numbers in one way or another? Instead of 25%+ equity and no cash in the deal, maybe I only end up with 15% equity and a little money left in the deal. Still better off than buying a turnkey. So, from your example, the only way a BRRRR would be more risky is if you are using high cost money for the purchase and rehab and can't get a high enough appraisal for the refinance. However, We are comparing from the stand point of having enough money for a down payment on a turnkey anyways so this point is also moot.

If you have the time, it is infinitely more profitable to do a BRRRR over a turnkey. How do I know this? My return is infinite, while those buying turn key are getting 10-15% cash on cash with a pile of their money locked into the property, I have none. It will take a turnkey buyer ~a decade to make their initial down payment back, I've got all my money back in 6 months. A turnkey buyer is stuck in the property and can only sell at a loss for years (commissions etc, most bought above retail value), a BRRRR can be sold at a profit once rehab is done in 2-3 months. I can now take my money and repeat again immediately, the turnkey buyer has to lock up another 25% down payment to do another one and may have to save up for a long period of time to repeat.

Can you tell which one I favor?  I wouldn't even consider a turnkey, ever.

It's great to set a goal but like mentioned above be careful not to let it discourage you if you feel like you're falling behind schedule.  I did my first two in the past 12 months but there is more to making progress than just the units.  I spent a lot of time lining up as many financing options as I could so when the deals show up I'm ready to go.  I also established relationships with contractors etc.

I've got my own number and I know as long as I keep working every day I'll get there as quickly as I can.  At the same time I'm patient, I'm not going to buy just to buy, I want deals and will only buy at a discount.  I believe this strategy will get you there much quicker than doing the conventional loans with the 25% down payment that is then stuck in the property for years.

One pet peeve of mine however is discussing REI in terms of units instead of $ value. I have 2, but had I been doing the same thing in most other parts of the country I would have 5-10 units for same value.