All Forum Posts by: Miller McSwain

@Matthew Metros They will certainly be very similar! At its core, BRRRR is basically a flip, but at the end you keep the property as a rental instead of selling it. This has HUGE advantages. Primarily, you avoid having to pay a huge amount in taxes, because you don't realize the capital gains. The gains are left in the property as equity. Also, if done in the ideal way, you pull your money back out of the deal in the refinance stage (leaving the gains in as equity), and you can continue building a rental portfolio.

The buy part should be exactly the same. You want to find a distressed property that you can fix and create equity in. 

The rehab part will likely differ slightly. For a rental, you want to be careful of over-rehabbing. Typically you will just want to fix the property up to a reasonable level. Renters aren't looking for the nicest houses in the neighborhood, so there is a point in the rehab where you are throwing money away if you spend too much. 
For a flip, you will likely fix the property up to a higher level, because you are marketing to home buyers (who have a different mindset). The home buyers will likely want some of the nicer renovations.

So, ultimately, the processes are very similar. You could even intend to flip a property, but after the rehab decide to BRRRR it, or vice-versa. The main difference is that the level of rehab isn't quite the same between the two.

@Matthew Metros I'll give my two cents on the topic, but I'll definitely be interested to hear what more experienced people suggest.

To open any business account, you will need an entity. S-Corps are typically better than LLC's for businesses like wholesaling/flipping. This is because you can reduce the amount of taxes you will owe by paying yourself partially with a salary and partially by distributions. Definitely read up on the topic before deciding between an LLC or S-Corp.

Once you have an entity, you can open a business account. From what I've seen, almost all business accounts charge monthly fees. For a new business owner, this may or may not matter, but I'd still rather not have to pay fees! The only account I've found that is fee-free is through Azlo (https://www.azlo.com/). They are online-only, but I don't think this is an issue. Business transactions are never cash these days anyway.

As far as the actual structure of the accounts, I would recommend having an account for expenses (with checks to pay contractors), an account for saving for flip purchases, and an account for taxes (I'd immediately throw at least 30% of your profits into this account).

I'll be curious to see what other people recommend though!

Hey Joseph. Great introduction, and welcome to BP!

I attend the University of Tennessee, but I've been interning away from the University for about a year. I'm returning in January and plan to buy a rental! I've saved up enough capital but will likely run into issues with financing since I'll be employed part time. 

In the case that I can't get financing, I will likely start look for partners or start wholesaling. I've been reading a ton and have been building tools/processes for wholesaling, so I'm super excited to jump into that world!

I sent you a connection request. I'll be sure to contact you if I find a great deal!

I'm curious, how distressed was this property. And if it was highly distressed, did you have difficulty getting FHA to lend on it?

@Steven Foster Wilson Great point about experience!

@Bryan Rodas FHA or conventional are definitely great places to start for your first property. Just keep in mind that those won't work for a BRRRR property in need of a big rehab. It can work for a property that needs some minor fixes though.
Also, with FHA, you will be required to live in the property for a year; however, you can still house-hack the other rooms in the property to bring in some rental income!

Typically with BRRRR, you are purchasing a property that is in bad shape. This makes financing a bit tricky because banks are typically opposed to lending on run-down properties. So you usually have to find an alternative. I'll list some options below:

1. Hard-money
This is the easiest to obtain but probably the most expensive. Hard-money is given by a lending business and charges high-interest rates. Hard-money can be great because they can lend for the purchase and rehab, but just know that you will pay a hefty price.

2. Private-money
Private money can be more difficult to come by but is typically cheaper than hard-money. Private money comes from an individual that is looking to invest some of their funds, typically because they want a higher return than the stock market can give them. Private investors are typically found in your network: family, friends, REIA groups, etc. You will typically develop a strong personal relationship with this person before using them as a lender.

3. Partner
Similar to private money, you can purchase deals with a partner. Typically in a partnership, you bring something valuable to the table and the partner brings something different. For example, you may be great at finding deals and managing rehabs, and your partner may have the cash available to purchase a deal and be great at finding/managing tenants. Since you both have skills/resources that the other person needs, you may decide to partner on a deal and split the profits.

4. Cash
If you have the means, you can purchase BRRRR deals with cash you have saved.

These are some of the methods you can explore. Keep in mind that while you can keep these forms of financing for the duration that you hold your BRRRR, you can also refinance (the 3rd R) into a conventional loan once the property is fixed up. As I mentioned, banks don't like to lend on distressed properties, but once the property is in good condition, they will likely give you a loan.

After listening to the BP podcast for a while, I have heard that most people who get into commercial start in residential; however, this is not always the case. 

Starting in residential can be a good stepping stone because:
1. You can easily find a residential deal yourself
2. You can easily pay for a residential property yourself
3. You can easily manage a residential property yourself
Additionally, I think investing in residential is much less risky for a new investor because if you were to make a huge mistake (unlikely), then there are plenty of people that can buy the property from you (home-owners and investors). 

Commercial on-the-other-hand often involves raising money from other investors or working with partners. If you are considering jumping into commercial, finding a great partner will greatly help your odds of success since they can teach you along the way. The downside is that if a mistake is made, commercial properties are often much more difficult to get rid of.

Personally, I have just saved up enough for residential property and am actively looking for my first deal to purchase. I eventually would consider buying commercial; however, I would rather start in residential because I can ask questions to the tons of residential investors in my area, I can easily manage the property myself, and it is a bit less risky.

That being said, I think both are great options and have been proven to make people wealthy as long as the correct steps are taken.

@Caleb Bryant

Cash sales on the MLS is another great idea! I'll add that to my list!

For skip-tracing, some of the services I've heard of the most are www.batchskiptracing.com and www.reiskip.com . I haven't personally used them, but I'd recommend looking into those. 

For cold-calling, check out Call Rail. This service allows you to create phone numbers to call from (so that you don't have to give your personal number away). Additionally, Call Rail will help you track the performance of your campaigns. Additionally, check out Call Tools. This service takes the phone numbers from Call Rail and allows you to dial multiple numbers from your list at once.

That is an awesome list! I haven't used Facebook, but that sounds like a great method for finding buyers that I can implement. 

One more option that may be of use to you or others is buying a 100% equity absentee list. The individuals on the list will own their properties free-and-clear and will likely be investors. If you already have buyers you work closely with, you probably don't need this method, but if anyone is struggling to build a buyer's list, this could help.