All Forum Posts by: Wesley Mitchell

Originally posted by @Michael Noto:

In my experience the only disadvantage with a BRRRR is that based on the appraisal on the back end you may end up being more out of pocket than expected. So, if you need every last dime back that you put in, then this strategy will make you a nervous wreck.

Can you afford to keep 5-7k in per property knowing you will get that back in 1-2 yrs max if it cash flows? If so, then as long as you have a dependable place to refinance the strategy can work for you.

The biggest thing I see as I talk to people in my local market here in Connecticut about this strategy is they think they will get every last dime back on the back end. Does that happen? Sure it does. Often times it doesn't though, so just like with any other real estate strategy you need to be ok with unexpected outcomes.

 Yea this is one of the reasons i feel i may end up flipping a few to build liquidity first. Me and my wife cant lose 5-7k right now we don't have that. But hopefully i find some homerun deals so thats not an issue.

Originally posted by @Jason D.:

@Wesley Mitchell yes, the most important thing is to make sure the numbers are right, with cushion. With the BRRRR there is temptation to manipulate the numbers to make a deal work. Be conservative, and if the numbers don't work, move to the next one. For instance, I'm finishing up a BRRRR right now. Bought for $55k, estimated $35k in reno over 4 months, and an ARV of $130k. How it really turned out was a renovation of $45k and 6 month reno. In this case, the ARV is probably closer to $140k so It worked out. Luckily I bought it with enough cushion that the extra money and time will only hurt my cash flow a little, but the deal still works.

Good ok so now getting a good deal is paramount after which i have to run the numbers for the exit. I still think i want y first few investment be flips but im really liking this BRRRR

Originally posted by @Lee S.:

It's relative, more risk involved with a BRRRR vs doing nothing, but less risk vs buying retail off the mls because if you buy right you have a big cushion for error. I've done a couple so far, won't do it any other way.

However, I approach all investments from a worst case scenario.  Worst case in real estate does not equal 100% loss.  I have to know I can carry the costs of the property if I miss on the numbers, can't rent or sell it for an extended period of time.

I ended up with 150k equity and easily rentable houses because they were rehabbed well.

 so big cushion plays a big part interesting 

Originally posted by @Jason D.:

There is always risk. I think the biggest risks with the BRRRR is not being able to refinance the property, or over estimating the ARV and having to leave a ton of money in the property. I think some of the risks are mitigated by the amount of equity you have when completed, so a downturn will likely not leave you upside down in the property.

 ok so if i understand you correctly the biggest the most important thing would be insuring that the numbers are accurate or conservative during the purchase and the refinance. That makes sense it's a lot of pressure to get it right.

I was wondering what type of disadvantages or risks comes with using the BRRRR strategy? I own a home that is fully paid currently if i use that (HELOC) to pay for another which i then rehab, rent, cash out refi for another so on and so forth i will have multiple loans out at the same time. I understand if they are cashflowing the properties pay for themselves. Is the anything that could happen to stop the progress of the investments or worse cause it to stop or lose money? For example if the market crashes like 2008 is there a way that everything could be lost in one fell swoop? Or does the fact that you can sell the property counteract any and all problems that could arise?

Congratulations! I don’t have any advice to give because I’m just starting out, but the fact is this is real progress for you and I wish you the best!

Originally posted by @Nathan Platter:

Hey @Wesley Mitchell ,

Sounds like you're indirectly pursuing the  BRRRR method; acquire a property, improve it, then refinance and get your money back (in this case it'd be 75% of the ARV after improvements) This would help you keep the house as well as attaining funds for your next investment.

https://www.biggerpockets.com/renewsblog/category/...

Thanks, I've looked into the BRRRR method and am really interested! Unfortunately i don't have enough capital to feel secure to do it exclusively. My income cant withstand a vacant property even if i put it into my calculations so I'm looking to sell my first few properties after renovation. At year 2-3 I fully plan on holding for long term wealth.

Its so many resources for buying and holding I'm looking for strategies to buy and flip consistently and hold onto my house at the same time.

To me this is a huge advantage! Knowing what direction the community is going is vital if you plan on holding property. One of the biggest reasons I want to invest in my native west Philadelphia Area is I know where UPenn and Drexel are planing to build and how that effects the homes in the area. That with the building of the new police building and other factors help we decide if or when to get involved.

I’m just starting out on my real estate investment journey. The only thing I have to get started is a property I’ve inherited that own free and clear with an zestimated worth of 83,000. My wife and I make a combined 90k a year. Little debt (under 35k). And credit scores of around 650. We have no real substantial money we can use to invest other than the equity in the inherited home. The home it self is need of a total remodel. It was built 1915 and the bones are super solid but the last major work was done around the 70’s. My dream is to keep the house, totally renovate it, and some how use it to also fund an investment opportunity(flipping not holding). Options that come to mind are getting a Heloc for around 60k, use 15k with hard money or bridge for a fix an flip and the remaining 45k for my main property. Other options presented to me is a long flip where i get a traditional loan for a new property 203k FHA and live in that for a year then transition to the other after I’m finished the occupation requirement to sell. Is there any other way I can use the equity in my home to both fix my current home and fix and flip in another??

Welcome! Although I'm new to Bigger Pockets myself, I'm a Philly lifer. You came at a great time and i know you will love it! Good luck on your investment adventure.