Just found 2 houses in South Carolina. Seller wanted $10k, got it under contract for 5K, Wholesaled it for 20k. The second house the seller wanted 15k, I brought for 10k with the proceeds the first deal I assigned. Now I'm going to fix it up and force some equity into the property. Ok, my question. Is it better in the long run to do a cash refi, or a HELOC if Im just starting out as a new investor. Sorry for the long intro guys. Thanks!
I think it depends on what your strategy is. If you’re building your portfolio IMO it’s better to do a cash out refinance. You will have your cash back and still own the property.
Cash out refi. HELOC usually has higher interest. I'd run the numbers though and make sure the cash out refi was worth it before doing it though, because of the closing costs.
I have to say that a lot of investors have stopped actively buying homes. I'm in the Midwest and for the first time in about 8 years I'm finding deals on the MLS. I still pursue Preforeclosure homes 1st and foremost but I have found more deals in the last 6 months than in the previous 2 years. This includes buying homes at a 20% discount to market value and yields above 25%.
Quick tip for slightly lowering your interest rate on your BRRRR refinance: Part of the BRRRR strategy is to get your investment back to a cash out refi after you forced appreciation. A cash out refi is more expensive (higher interest rate) then a rate and term refi (one where you don't pull out cash). I refinance is considered cash out if funds are going anywhere other than paying off the first lien (so if you have a second, a HELOC, if you're paying off other debt, then it's a cash out refi and even if you're not pocketing the cash). When you purchase the property if you're using a hard money loan, most of those lenders will also finance the rehab costs. Calculate 75% of the ARV, subtract your purchase price, and that's what you report to the hard money lender as your rehab budget (it should be realistic, adjusted downward if needed). They will loan you those funds throughout the project, and it will be on title as part of your first-lien. When you go to refinance, you do a rate and term at a lower rate rather than a cash out, because you already got your cash out during the rehab process from the hard money lender.
The BRRRR method been dead in Atlanta. We’re the most overpriced market in the country right now. Better off buying/building new construction and holding. No point of dealing with old existing houses with the typical renovation needs.
The opportunity to buy real estate is dead. Average people can't compete against Corporations Buying Homes, Serial House Flippers, Foreign Investors buying cheap at 25% down, Brokers operating like Car Salesmen, High interest rates, Inflation. Better off making a living remotely from overseas. Who ever tells you otherwise is always selling you course. No surprise at increase of Squatters and Homeless.
Thank you!!! The guys telling you to go buy houses are selling courses or making money on CZcams. Ask them when the last time they purchased an investment property. 95% of them haven't bought since 2020. Makes sense. Who wouldn't be sitting pretty buying then. Knocking on people's doors asking them if they want to sell their house is not my idea of investing.
I'd tell newbie investors to start big. 30-35% down on a turnkey property. That is a more safe/conservative way to make sure your first property is up and running and has cash flow thanks to the bigger down payment. BRRRR is great whenever you have a larger portfolio of properties that have a diversified risk assessment across the board.
It may take a year or longer to save the extra 10-15% down, but in my experience, you could spend that year making all the improvements yourself(especially with labor right now). It might be easier on your mental health to simply maintain your current lifestyle and hoard cash with overtime or side jobs.
@@jonlee6114 My first rule is that I'd only invest in a place I'm willing to live in myself. Unless you've lived in/near that market before, I'd be pretty cautious about out of state just to keep better peace-of-mind. I'm also a big fan of policy that rewards local investment over out-of-state investment so I'm a bit biased haha
🎥 Wow, this video on the BRRRR Method is fantastic! 👏🏼 The clear and concise explanation of the process makes it easy for anyone to understand. 💡 It's great to see the different perspectives and insights from experienced real estate investors. 🙌🏼 I would love to see more case studies and real-life examples in future videos. 🤔 Overall, excellent job! Thank you for sharing your knowledge with us. 🙏🏼
As was mentioned in the episode, the more expensive the house is, the more you can undercut the 1% rule. If I buy a house for $1,000,000 and rent it out for $7500. I'm cash-flowing a few hundred bucks. Not a great investment when you don't know which way the wind will blow, but I've never loved buy and hold. I'm a fix-and-flip kind of guy.
@@Adrian-yi8fl I’ve seen 1 million dollar homes in California struggle to rent for over $5,000/month. The rental market is just way too skewed from the prices especially in the higher end.
@@Mayordomo32 agreed. I live in Southern California and there's no way you can brrrr here unless you leave a bunch of money in the deal. I've never met anybody who did.
I'd love to see a 1.5% deal on the West Coast today. Show me one. Just one 😂 In fact, show me a single .7% deal anyone did on the West Coast in 2023 off of Zillow. Now, in 2023, the ENTIRE strategy is based on getting pre list deals for 50c on the dollar, AND waiting 18-24 months to refi. All these guys hit the jackpot in 2011 - 2022. That time may not return for another 30 years. Now, we'll have to work 3x as hard, and get 1/3 the return. That's the God's honest truth. And that's OK 👍
100% the guys who are preaching how to buy rental properties have made their nut pre 2020. Selling courses and CZcams videos now telling everyone else how to do it. We know how to do it. The deals or "scraps" aren't deals. Unless your looking for a primary.
@@rsasllc-houseflipping6917 I used the holder of the first position, but it was like pulling teeth due to the original lender being bought out by a credit union who really didn't want to have anything to do with investment properties. In your case, look for a bank that does commercial lending or lenders who hold the financing in house.
@Alan Hernandez I have a few properties including 2 sides of a duplex that's due for a rent increase this summer so I plan to increase each side by $50 and if the tenants decide to move then I will add some new flooring and market each side for additional $100 per month. Some SFs due for an increase also. Enough to keep me busy for the summer.
You can find a better DSCR lender. It's more common to just require owning the property for 6 months. So a 3 month renovation and 3 month's rent will count as 6 months.
Woah! You just breezed right by refinancing INTO a credit line around minute 18. Please go into depth on this. Google only wants to pull up HELOC info which doesn't sound like what you are using. Is this even attainable for a newer investor?
I feel like I missed the train for BRR. Rates are going up for who knows how long. Maybe it's time to just park any extra cash in a money market fund making 4% and wait for the fed to start cutting rates again, and then start the BRRR.
Let me tell you, I've seen homes that you can tell they bought, renovated and renting. Half the house is completed and they want market value rent. Insane
Can you do House Hacknwith hard money lender route, where you buy, reno, refi, leave some equity in it and live and rent one side of the property ? The reason I’m asking is I have a hard money lender who’s willing to lend 75% of ARV and he is willing to cover 100% of reno cost and cover 100% of the closing cost as long as we can roll in everything under those 75% which could allow us to do it with $0 out of our pocket if we find the right off market property on a steep discount? Ps. Been wholesaling for year and a half and I know how to find good off market property. I would like to get your insight. Thank you again!
What did you end up doing here? Were you given any advice that you can share? I, myself have a hard money lender that I'm working with. All the same terms except I have to pay 10% down. I believe you should be able to do what you're asking though as long as you refi.
I like most of this other than the Stock Market is risky. If using Passive Investing, as in grabbing a low cost Vanguard Fund that tracks the S&P 500. It's not really risky. It's not sexy, but it has proven returns. Not saying you shouldn't diversify and buy RE. I do as well, but low cost Index funds are a great entry into the stock market.
Is the BRRRR method possible buying a rental property using conventional with 20% down, under market value, and still take out most or all of down payment after rehab??
Why is real estate investing the most difficult thing to do?? Man I wish I wouldn't have decided to get started at the worst possible time possible to invest.
I'm fighting the same feeling. It's just an intrusive thought and I do best to ignore it. I have a plan and I'm doing all I can to picture in my head that plan coming together... It's a small plan, quite frankly, but it's a plan. Now, with all that said, you're not wrong. 🤣 Just a matter of time. 🙏
I have a topic question. Newbie here looking to start sometime this year. Prices in my area a ridiculously high and low inventory. There is an area 3 hours away but the area is old and depressed and one of the primary employers just closed. I think it has potential in the future, especially with remote workers and if industry rediscover it. My question is, worth to buy a few super cheap properties there ? Main issues, low rents, lack of legit contractors/service in area and fairly high crime rate.
The goal in investing is to eliminate or mitigate as much RISK as possible, to give your money the best chance to make more money. It sounds like that entire idea is a gamble and an unnecessary risk. You can always wait for something to pop off in that area’s market. If a major production factory bought land there to build a factory for example, that will produce jobs, and stimulate the area. As long as you get in EARLY, you will win. You don’t want at risk funds, sitting in holding property doing nothing, when you could use those same funds to produce cash flow elsewhere.
BRRR is extremely risky for almost all investors, its also very time consuming and stressful. There are so many moving parts your bound to get screwed by one of them. You buy with low money down (high risk and no everyone buys right), fix it up (more risk and not everyone can deal with renos), rent it (more risk and not everyone is a good landlord) , refinance.....(more risk since its more debt and you don't know what the appraiser will say...the market could tank after all your hard work....rates could jump). Your probably better off buying a nice house in a nice neighborhood and rent it out and sleep better at night instead of a 4 month saga called BRRR.
Guys, I purchase a in Orlando, set it up as an Airbnb for the past two months and it’s working well , the interest was gonna hide a .125% and I use a Heloc to put down 20%. I invest in about 15 K in repairs and upgrades. My idea is to refinance and include my heloc in the new mortgage, based on market . How long will I have to wait?
14:50 - David Green I’m pretty sure Henry didn’t find your mocking of what you think his voice sounds like funny. It’s actually a bit insulting. I’m sure you didn’t mean anything by it, but it’s a bit insensitive and definitely not funny. And he doesn’t sound like that🙂. I think I’ve heard you do that once before as well.
Just found 2 houses in South Carolina. Seller wanted $10k, got it under contract for 5K, Wholesaled it for 20k. The second house the seller wanted 15k, I brought for 10k with the proceeds the first deal I assigned. Now I'm going to fix it up and force some equity into the property. Ok, my question. Is it better in the long run to do a cash refi, or a HELOC if Im just starting out as a new investor. Sorry for the long intro guys. Thanks!
I think it depends on what your strategy is. If you’re building your portfolio IMO it’s better to do a cash out refinance. You will have your cash back and still own the property.
Cash out refi. HELOC usually has higher interest. I'd run the numbers though and make sure the cash out refi was worth it before doing it though, because of the closing costs.
I have to say that a lot of investors have stopped actively buying homes. I'm in the Midwest and for the first time in about 8 years I'm finding deals on the MLS. I still pursue Preforeclosure homes 1st and foremost but I have found more deals in the last 6 months than in the previous 2 years. This includes buying homes at a 20% discount to market value and yields above 25%.
I'm just jumping into this. Any advice on where or how to find preforeclosures?
Quick tip for slightly lowering your interest rate on your BRRRR refinance:
Part of the BRRRR strategy is to get your investment back to a cash out refi after you forced appreciation. A cash out refi is more expensive (higher interest rate) then a rate and term refi (one where you don't pull out cash). I refinance is considered cash out if funds are going anywhere other than paying off the first lien (so if you have a second, a HELOC, if you're paying off other debt, then it's a cash out refi and even if you're not pocketing the cash).
When you purchase the property if you're using a hard money loan, most of those lenders will also finance the rehab costs. Calculate 75% of the ARV, subtract your purchase price, and that's what you report to the hard money lender as your rehab budget (it should be realistic, adjusted downward if needed). They will loan you those funds throughout the project, and it will be on title as part of your first-lien. When you go to refinance, you do a rate and term at a lower rate rather than a cash out, because you already got your cash out during the rehab process from the hard money lender.
The BRRRR method been dead in Atlanta. We’re the most overpriced market in the country right now. Better off buying/building new construction and holding. No point of dealing with old existing houses with the typical renovation needs.
The opportunity to buy real estate is dead. Average people can't compete against Corporations Buying Homes, Serial House Flippers, Foreign Investors buying cheap at 25% down, Brokers operating like Car Salesmen, High interest rates, Inflation. Better off making a living remotely from overseas. Who ever tells you otherwise is always selling you course. No surprise at increase of Squatters and Homeless.
Thank you!!! The guys telling you to go buy houses are selling courses or making money on CZcams. Ask them when the last time they purchased an investment property. 95% of them haven't bought since 2020. Makes sense. Who wouldn't be sitting pretty buying then. Knocking on people's doors asking them if they want to sell their house is not my idea of investing.
I'd tell newbie investors to start big. 30-35% down on a turnkey property. That is a more safe/conservative way to make sure your first property is up and running and has cash flow thanks to the bigger down payment. BRRRR is great whenever you have a larger portfolio of properties that have a diversified risk assessment across the board.
It may take a year or longer to save the extra 10-15% down, but in my experience, you could spend that year making all the improvements yourself(especially with labor right now). It might be easier on your mental health to simply maintain your current lifestyle and hoard cash with overtime or side jobs.
BRRRR is how I rapidly built my portfolio. I used the same money over and over again.
Thoughts on out of state investing?
@@jonlee6114 My first rule is that I'd only invest in a place I'm willing to live in myself. Unless you've lived in/near that market before, I'd be pretty cautious about out of state just to keep better peace-of-mind. I'm also a big fan of policy that rewards local investment over out-of-state investment so I'm a bit biased haha
🎥 Wow, this video on the BRRRR Method is fantastic! 👏🏼 The clear and concise explanation of the process makes it easy for anyone to understand. 💡 It's great to see the different perspectives and insights from experienced real estate investors. 🙌🏼 I would love to see more case studies and real-life examples in future videos. 🤔 Overall, excellent job! Thank you for sharing your knowledge with us. 🙏🏼
Glad it was helpful!
Abiding by the 1% rule means that you’re just not buying in certain states altogether. California for example.
it's more like 1.3% rule now with interest rates
As was mentioned in the episode, the more expensive the house is, the more you can undercut the 1% rule. If I buy a house for $1,000,000 and rent it out for $7500. I'm cash-flowing a few hundred bucks. Not a great investment when you don't know which way the wind will blow, but I've never loved buy and hold. I'm a fix-and-flip kind of guy.
@@seanbrandle3917 where in California will a 1 million dollar home rent for 7,500/month?
@@Adrian-yi8fl I’ve seen 1 million dollar homes in California struggle to rent for over $5,000/month. The rental market is just way too skewed from the prices especially in the higher end.
@@Mayordomo32 agreed. I live in Southern California and there's no way you can brrrr here unless you leave a bunch of money in the deal. I've never met anybody who did.
I'd love to see a 1.5% deal on the West Coast today. Show me one. Just one 😂
In fact, show me a single .7% deal anyone did on the West Coast in 2023 off of Zillow.
Now, in 2023, the ENTIRE strategy is based on getting pre list deals for 50c on the dollar, AND waiting 18-24 months to refi.
All these guys hit the jackpot in 2011 - 2022.
That time may not return for another 30 years.
Now, we'll have to work 3x as hard, and get 1/3 the return.
That's the God's honest truth.
And that's OK 👍
100% the guys who are preaching how to buy rental properties have made their nut pre 2020. Selling courses and CZcams videos now telling everyone else how to do it. We know how to do it. The deals or "scraps" aren't deals. Unless your looking for a primary.
Really good episode. I enjoyed the conversation style approach and hearing bits of the host’s personal stories.
I did a ... modified brrr. Kept the original loan at 3.5% and got a 2nd position to finance the renovations at 6.5%.
I want to do that with an upcoming project but I can't find a lender that wants to take 2nd position. Do you have any recommendations?
@@rsasllc-houseflipping6917 I used the holder of the first position, but it was like pulling teeth due to the original lender being bought out by a credit union who really didn't want to have anything to do with investment properties. In your case, look for a bank that does commercial lending or lenders who hold the financing in house.
Great episode. Way to keep it as real life as possible
Instead of focusing on finding another deal, I plan to put my energy into some rent increases and value adds to my existing properties.
Can you give a few examples? I have a single family home rental unit but it’s pretty much maxed out in terms of upgrades and it’s in an HOA
@Alan Hernandez I have a few properties including 2 sides of a duplex that's due for a rent increase this summer so I plan to increase each side by $50 and if the tenants decide to move then I will add some new flooring and market each side for additional $100 per month. Some SFs due for an increase also. Enough to keep me busy for the summer.
I was told by a lender that the seasoning requirement dealt with having a renter in the property for a minimum amount of time (6months)
True for some hard money lenders some can do 3 months but Freddie Fannie are 12 months right now. At least for cash out.
@@DarrellEssexdoubleteam this was a DSCR lender
You can find a better DSCR lender. It's more common to just require owning the property for 6 months. So a 3 month renovation and 3 month's rent will count as 6 months.
Things are becoming more difficult than ever, especially when trying to get started in real estate.
Woah! You just breezed right by refinancing INTO a credit line around minute 18. Please go into depth on this. Google only wants to pull up HELOC info which doesn't sound like what you are using. Is this even attainable for a newer investor?
Great info, and you guys are hilarious! Thanks for the great show.
When the interest rate is this high, it only makes sense that some of the strategies we have used thus far no longer works.
Great episode guys which was very informative and a lot off laughter! Thanks
Glad you enjoyed it!
Excellent information. Right on the money.🤙🏽
This discusses makes me wonder if 2023 is not the year to be getting in to a BRRR with these high interest rates.
I feel like I missed the train for BRR. Rates are going up for who knows how long. Maybe it's time to just park any extra cash in a money market fund making 4% and wait for the fed to start cutting rates again, and then start the BRRR.
can you explain refinancing into a credit line?
Let me tell you, I've seen homes that you can tell they bought, renovated and renting. Half the house is completed and they want market value rent. Insane
That the guys from bigger pockets bought?
Can you do House Hacknwith hard money lender route, where you buy, reno, refi, leave some equity in it and live and rent one side of the property ?
The reason I’m asking is I have a hard money lender who’s willing to lend 75% of ARV and he is willing to cover 100% of reno cost and cover 100% of the closing cost as long as we can roll in everything under those 75% which could allow us to do it with $0 out of our pocket if we find the right off market property on a steep discount?
Ps. Been wholesaling for year and a half and I know how to find good off market property.
I would like to get your insight. Thank you again!
What did you end up doing here? Were you given any advice that you can share? I, myself have a hard money lender that I'm working with. All the same terms except I have to pay 10% down.
I believe you should be able to do what you're asking though as long as you refi.
Guyssss......so how do we find the off market deals? What episode/s do we watch? What book/s do we buy? Thx in advance!
I like most of this other than the Stock Market is risky. If using Passive Investing, as in grabbing a low cost Vanguard Fund that tracks the S&P 500. It's not really risky. It's not sexy, but it has proven returns. Not saying you shouldn't diversify and buy RE. I do as well, but low cost Index funds are a great entry into the stock market.
David the BRRRRoker.
I'm terrified of the brrrr😅
I haven't started investing yet, but i think I'll have to be pretty far along to get where I'll attempt a brrrr
Is the BRRRR method possible buying a rental property using conventional with 20% down, under market value, and still take out most or all of down payment after rehab??
Depends how cheap you buy it
Why is real estate investing the most difficult thing to do?? Man I wish I wouldn't have decided to get started at the worst possible time possible to invest.
I'm fighting the same feeling. It's just an intrusive thought and I do best to ignore it. I have a plan and I'm doing all I can to picture in my head that plan coming together... It's a small plan, quite frankly, but it's a plan. Now, with all that said, you're not wrong. 🤣 Just a matter of time. 🙏
In Sweden the real estate prices has dropped 25%. It's easy to find BRRRR with 1% rule.
Did David get a fresh cut?
There are deals in the mls more than what’s off market!
how long should you wait to cash out refi ?
You guys are ridiculous, and I love it!
I have a topic question. Newbie here looking to start sometime this year. Prices in my area a ridiculously high and low inventory. There is an area 3 hours away but the area is old and depressed and one of the primary employers just closed. I think it has potential in the future, especially with remote workers and if industry rediscover it. My question is, worth to buy a few super cheap properties there ? Main issues, low rents, lack of legit contractors/service in area and fairly high crime rate.
The goal in investing is to eliminate or mitigate as much RISK as possible, to give your money the best chance to make more money. It sounds like that entire idea is a gamble and an unnecessary risk. You can always wait for something to pop off in that area’s market. If a major production factory bought land there to build a factory for example, that will produce jobs, and stimulate the area. As long as you get in EARLY, you will win. You don’t want at risk funds, sitting in holding property doing nothing, when you could use those same funds to produce cash flow elsewhere.
Sounds like you should run.
You would be prospecting, you might want to search out of state.
Do you still need to wait 6-12 months to cash out if you buy the rental property in cash?
No
BRRR is extremely risky for almost all investors, its also very time consuming and stressful. There are so many moving parts your bound to get screwed by one of them. You buy with low money down (high risk and no everyone buys right), fix it up (more risk and not everyone can deal with renos), rent it (more risk and not everyone is a good landlord) , refinance.....(more risk since its more debt and you don't know what the appraiser will say...the market could tank after all your hard work....rates could jump). Your probably better off buying a nice house in a nice neighborhood and rent it out and sleep better at night instead of a 4 month saga called BRRR.
I’d have to agree with you. This sounds exhausting and stressful.
Guys, I purchase a in Orlando, set it up as an Airbnb for the past two months and it’s working well , the interest was gonna hide a .125% and I use a Heloc to put down 20%. I invest in about 15 K in repairs and upgrades. My idea is to refinance and include my heloc in the new mortgage, based on market . How long will I have to wait?
Anyone else feel like they’re listening to Neil deGrasse Tyson talking about BRRRR?
Fun & useless fact, the Aaron Burr - Got Milk? commercial was directed by Michael Bay
Does seasoning applies to seller financing? Thanks!
You guys are hilarious!!!! 😂😂😂
what about instead of refi you use a heloc? i’m new to investing in real estate and just trying to soak as knowledge and different ways
Wow such awful info about refinancing! Don't ever BRRRR with conventional! Use small local banks who can lend how they wish.
14:50 - David Green I’m pretty sure Henry didn’t find your mocking of what you think his voice sounds like funny. It’s actually a bit insulting. I’m sure you didn’t mean anything by it, but it’s a bit insensitive and definitely not funny. And he doesn’t sound like that🙂. I think I’ve heard you do that once before as well.
Ever heard of Forrest Gump?
So I think David shouldn't use that southern accent ever again! 😂
You have to get creative to make it work...Either you do a refi cash out at a lower LTV, or something different than before...
Best time to house hack
Awesome !!!!… Hilarious