How to BRRRR Real Estate (WITHOUT Getting Burnt) in 2023
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- čas přidán 3. 08. 2024
- BRRRR real estate caught fire over the past ten years as the housing market steadily appreciated, with mortgage rates remaining low. Now, with mortgage rates high, real estate investors are taking a step back from the BRRRR method, so much so that some believe that BRRRR has reached its final days. But for others, the BRRRR will never die as; long as you take the right steps to outweigh the risk.
But what is the BRRRR method? BRRRR stands for buy, rehab, rent, refinance, repeat. For example, an investor buys a house that needs fixing up, renovates it, rents it out, and refinances to take out the equity they put into the property. When done correctly, the BRRRR method allows investors to walk away with a newly renovated property with barely any money left in the deal. This allows the investor to buy even more deals, infinitely recycling their capital while stacking their passive income.
James Dainard, Seattle-based investor and expert guest on “On the Market,” still sees the benefit of doing a BRRRR, even as real estate prices start to slide. While other investors run from a market like this, James is scooping up deals left and right. In this episode, James will walk through exactly how you need to underwrite, renovate, and plan for a BRRRR so you can get the most for your money without getting burnt on a deal. So is the BRRRR method dead in 2023, or can James resuscitate this investor-favorite strategy?
00:00 Is BRRRR Dead?
01:52 The 3 Things You Need
03:33 High Risk? Worth It?
05:46 How to Make the BRRRR Work in 2023
09:12 Would You Buy This Deal?
12:00 Define Your BRRRR Buy Box
12:46 Can You Still BRRRR in 2023?
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I had someone say the new 12 month seasoning with Freddie Mac for investment properties that BRRRR is next to impossible now. Would love to have perspective on that.
I've been thinking the same thing. BRRRR doesn't work in a hot market, like the last couple of years. But now that you can buy at a discount and rates are high, if you can account for that and the numbers work, it will be a great strategy. The important thing is to assume it will be 2-3 years before rates are significantly lower.
💯
So do you wait to refi till the rates go down? Or refi twice?
Super helpful
The moncler jacket is fire lol
😂 thanks! Cash flow paid for it!
Close on permitting is a great idea. Love that! 🍀 Thank you!!
Thanks Susan 🙌🏽
No strategy ever dies, every strategy has to be able to be fluid to conditions. If you feel it’s dead find someone who is still working it and find out what they shifted.
💯 pivot with the market!
This dude always brings value.
Thanks Michael!!!
Awesome video.
Thanks!
Killer explanation on how a BRRRR deal works with actual numbers to illustrate. Armed with this info, I have a few potentials in my area I can make a move on.
Thanks!!!
This content is sooo good. Step by step plan how to set yourself up to win.
Thank you 🙌🏽
Great vid James!
appreciate it
Thanks Julio!
6:19 This is one of the things I’m doing to make sure I survive 2023! I just posted a video about the tweaks I’m making in my own strategy as well.
That’s a beautiful old house. If it’s in a national register historic district, it’s likely also eligible for historic preservation tax credits. No one ever talks about those.
Question for you James, how much do you like to see in monthly cash flow on a single family home when brrrr-ing? In this market with rents possibly falling would you want more cushion?
Edit* saw you sort of answered my question at the end. Very interesting you will accept to break even for a couple years, good info thanks.
And KEEP GOING until you've reached the monthly passive income you need to live FINANCIALLY FREE! Build a team and have systems in place. Love the BRRRR.
So you but the second one with the equity you get back but you need to pay interest on that equity and if you use it as a down payment you need to pay interest too, plus the interest on the first mortgage, I think I am loss, is this the way is works?
Homes that are over $400K are hit the hardest right now and no one can afford to buy one or rent one. Every investor I've talked to has talked about this.
Market depending, our $400k market is more of the $600-750k fixers
Is there a such thing as operating expenses in your underwriting? Love your videos normally but am confused by how you can say you’re cash flowing 600 dollars in two years with a strong assumptions rates will go down and without factoring in any OE in your breakdown.
I think I ran past you in Newport beach a week or two ago.
Next time say hi!
How do you work the numbers backwards?
Good thing your broker is checking the Bitcoin chart
I know some investors get construction loans based on future value. Basically covers cost of rehab and fixer with 20-30 percent down. My understanding is that hard money loans are 80 percent of fixer price and investor covers cost of rehab. Would someone expain, please
Do u have to do a ADU ? Or just rent an extra room?
Adu would be more income then a room, depends on the project. If it’s down to studs already it’s easier to add a ADU then cosmetic.
I don’t see the problem with having higher rates. If anything that’s an opportunity for new investors to get in the game, if they’re willing to increase there income. (Yes I said willing) 😊
Just have to off set the debt costs with a lower price, more to look at 👀
Can this work in California?
Yes! In numerous areas
Doesn’t it ruin your credit if you refinance all the homes? Refinancing is part of the brrrr process
Tons of variables on this, hard money, conventional- you have a lot of options depending on your strategy and length of investing (can you count rents towards income), connect with your CPA and build a relationship with your lender
Does it really take 12-15 weeks to get a permit pulled and paid for? I work for a remodeling contractor in Iowa and here it takes 2 weeks tops. Am I missing something?
Really depends on the city. In Chicago it can take longer than the 12 to 15 weeks mentioned.
City specific and scope of work specific. Each city has their own requirements
1:00 whoops forgot Rent
This strategy assumes you have 100% occupancy in all the rental properties. What if you buy 3 or 4 rental properties and then your tenants decides to move out…how will you cover the mortgage? this is a recipe for disaster if you are not prepared for the worst case scenario.
Write in a standard vacancy rate in your pro forma to account for this, every are has an average. But yes, vacancy goes into our underwriting
Construction loan? Ugh, the worst.
Labor inflated. Materials inflated.
Average income won't qualify.
Selling 75% below appraised = reach.
Real inflation =18%, Irates =7%, what $?
What kind of loan are you talking about? Intrust Funding fund these in 48 hours. Asset backed
@@ProjectRE high interest, never all at once, releases $ slowly, must meet constant scrutiny checks. If cash on cash or IRR isn't at least 25%, are you just losing $ more slowly with taxes/inflation?
Would you be brave enough to walk up those stairs?
😂 solid!
Stop buying in metro areas. Try rural, go out of state. People don't realize how much damage you can do if you have Chicago money going into Alabama.
who pays 4,000 in rent.. can just buy a house for that monthly payment
It's possible that some people don't have the down-payment, so renting is the best choice. Or the renter will have a friend or family member taking on some of the rent, thus lowering the price. There's probably other scenarios I can't think of, but I get what you're saying, though.
Some people rent because of their credit scores, some are immigrants and can't purchase properties for some time
That's easy in NYC
Not on this street! This house is on one of the best n. Everett streets. But does depend on the location
Home ownership is a lot of responsibility. Upkeep can be costly. It is not for everyone, therefore some individuals are renters for life.
Is there a mental laziness in the phrase: X is dead, meaning BRRRR is dead, SEO is dead, social media is dead, content is dead....
Or, you live with several roommates-again California.
The city has COME in*