All Forum Posts by: Steve K.

Thanks @Cody Cook , I agree....I like IRR better; we're in complete agreement.....I could have emphasized IRR vs COC.

So, in Austin, you have 10%/yr appreciation. (not unlike Denver). Curious:

a) What do you project Austin appreciation to be in the future? Do you think "crash" is imminent, as some do?

b) Do you like BRRRR method with higher leverage?

c) What if you could extract your $122k equity, would you?

sorry then, @Craig Masters , I can't speak to 1099 qualifications....W-2 is my first language.

@Brian Nordman,

I'm not the best to reply.....many posters on BP are lenders. Try searching the forums for similar topics...or maybe @Harjeet Bhatti (above) is available?

@Omar Shahid , ...as you read BP, you'll notice most rental investors are striving for the cash on cash return. If you had to choose between two available properties, you might evaluate which is your better investment. If both require 25% down payment, "A" has 12% COC and "B" has 18% COC returns, it's easy to see that "B" is preferred. But now, what if "B" required you instead to put 60% down payment.....COC return might plummet?!?! In your case, your challenge is that you have the 60% down/equity.....low COC.

@Thomas S. correctly introduces an advanced concept of "opportunity cost".  If you see his other posts, he quantifies the "opportunity" cost of having equity tied up at 10% yield. He knows that if he didn't have too much capital tied up in your first property, he could instead earn 10% on that money elsewhere. He therefore brings that monthly "cost" into the analysis. Most BP analysis are simplified and can ignore that step, because (as above) you can compare apples to apples in "A" and "B" since both have the same capital invested. 

You have a bunch of money in your house making 3.7% yield (ie. your mortgage interest rate). Can you do better?

@Brian Nordman , ....and beware that the best loan terms for rentals (non-owner occupied) are the conforming loans that qualify for FannieMae/FreddyMac . As you build a portfolio, the first 4 loans (3 rentals and a primary mortgage (assuming you have home financed)) are easiest, then more stringent requirements for 10 loans. After that, your 11th and beyond need non-Fannie financing.

@Matt Jones , I wouldn't know....but @James Carlson is a great resource for Denver and surroundings. I recently went to his airBNB happy-hour seminar.

@Rich Weese , I agree 100% with your smart idea to build a new primary residence every 2.1 years....tax-efficient gains. Thanks for sharing. (I'm living in my second such new build....same idea). Moving isn't easy....but rewarding.

@Dallas Trufyn ,

As an investor, who likes to over-analyze things, I'm a big fan of Redfin. I found it the best to search my areas. You can set up email queries where it emails you new listings, change of price/status, sold ....in your neighborhoods. It also lets you download a bunch of active & past sales data into spreadsheets for more analysis. Once I learned all that was on a page for a property, I learned to like it best.

But...I echo, beware of the Redfin and Zillow "estimates". It's nice that it shows up automatically without any work....but it's likely way off. But....you can thumb through all the "sold" in your neighborhood in a few minutes and get a feel for what things are selling for.

If you see a fresh listing that is new and updated fixtures...peek down below at past sales.....I often study these, if it was sold 6 months ago, and now the flipper is selling the post-upgrade, I can learn alot from that flipper's before/after values and photos. I just don't know what it cost to do that.....so, educational to be looking daily at what's moving.

@Jamie Addeo,

Your margins look skinny for a major fix/flip. Maybe the construction cost can be lower. But I started fix/flip and fix/hold aiming for 70% cost on the $700k ARV.....acquire and rehab for $490k. You have budgeted $675k of $700k ARV.

Good luck

As mortgage rates on rentals increase, it does squeeze a BRRRR investors' margins. Yes, it's expensive to suffer closing costs on the acquisition loan, and then refi 6 or 9 months later....but it's not a perpetual deal. Each new rental could be held for 30 years with that cash out refi.

The point of BRRRR is to acquire more properties quickly, with minimum (ideally zero) down on each property after the cash out refi. If I could have acquired with a 25% Down and 4.5% APR loan, vs. the BRRRR and suffer a 5.25% APR loan 9 months later (with rehab profit), I can have a property with no cash in, the 5.25% loan and it still cashflows. Now repeat that 10 or 30 or 100 times and you grow wealth quickly and retire early.

If I offered to give you my home, with no money down, knowing it has a 5.25% mortgage and cashflows $200 or $300 per month....would you be happy to take it on? (or would you regret that you don't have a 4.5% loan? and pass on the deal). That's what each BRRRR feels like....no money down at about month #9).

Read further. There are BP posters who retire at age 32 after doing BRRRR like this for 7 years.