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Let's talk about BRRR
Buy
Rehab
Rent
Refi
and why it is a great wealth building tool
when you work it well
Buy
Rehab
Rent
Refi
and why it is a great wealth building tool
when you work it well
When optimally executed you will start
- A distressed property
- Purchased with your cash &/or private funds
and end with
- A renovated property
- Leased at top dollar
- Refinanced to at least recoup all your funds &
at most to put more money in your pocket for the next
So-
- A distressed property
- Purchased with your cash &/or private funds
and end with
- A renovated property
- Leased at top dollar
- Refinanced to at least recoup all your funds &
at most to put more money in your pocket for the next
So-
BUY:
Before you even buy a property, you have to know
your refinancing options & parameters
For a conventional loan this means:
+ 30 year fixed, nice rate
- Must own for 6 months before you can close
- Must close in your name (vs. LLC)
- 75% Loan To Value (LTV)
So....
Before you even buy a property, you have to know
your refinancing options & parameters
For a conventional loan this means:
+ 30 year fixed, nice rate
- Must own for 6 months before you can close
- Must close in your name (vs. LLC)
- 75% Loan To Value (LTV)
So....
The BUY is set up for success:
- Leave enough equity so the After Repair Value (ARV)
is high enough to leave you room for that 75% LTV
(ratio of the loan amount to the ARV)
- This means accurate $ for
repair overages
interest
carrying costs AND
appraised value
- Leave enough equity so the After Repair Value (ARV)
is high enough to leave you room for that 75% LTV
(ratio of the loan amount to the ARV)
- This means accurate $ for
repair overages
interest
carrying costs AND
appraised value
REHAB:
The calculations for the BUY depend on:
- Your renovation plan
- Your renovation estimates
- Your ability to know an accurate appraisal value
This is where the whole thing typically goes to hell.
HGTV fantasy budgets and values come into play.
The calculations for the BUY depend on:
- Your renovation plan
- Your renovation estimates
- Your ability to know an accurate appraisal value
This is where the whole thing typically goes to hell.
HGTV fantasy budgets and values come into play.
When it comes to REHAB budgets:
Add at least 20% to the costs and the time frame.
Anything can happen: from extreme weather,
to global pandemics.
Private money borrowers need to proceed with extra
caution because extra interest plus points for
loan extension is brutal
Add at least 20% to the costs and the time frame.
Anything can happen: from extreme weather,
to global pandemics.
Private money borrowers need to proceed with extra
caution because extra interest plus points for
loan extension is brutal
This is why this tweet from
@willnyguifarro1 is so accurate:
That cushion is rolled into
the purchase when you buy right. https://twitter.com/willnyguifarro1/status/1349893578890358790?s=19
@willnyguifarro1 is so accurate:
That cushion is rolled into
the purchase when you buy right. https://twitter.com/willnyguifarro1/status/1349893578890358790?s=19
Part of finding a deal: KNOWING the market
so well, that you see a deal where others don't.
And knowing the rental market so well, that you know
how to maximize the rental rate.
Now you can build wealth effectively..
so well, that you see a deal where others don't.
And knowing the rental market so well, that you know
how to maximize the rental rate.
Now you can build wealth effectively..
Because planning your REHAB to optimize the RENT
will also optimize the VALUE for the REFINANCE.
- Build equity
- Retain your cash
- Optimize your cash flow
- Repeat
Let's run some numbers:
will also optimize the VALUE for the REFINANCE.
- Build equity
- Retain your cash
- Optimize your cash flow
- Repeat
Let's run some numbers:
Let's say a house is worth $100,000 when in great condition.
This means your bank is going to lend up to $75000
of of that value after renovation (75% LTV)
so:
This means your bank is going to lend up to $75000
of of that value after renovation (75% LTV)
so:
A rough budget:
Carrying costs for 7 months: $ 5000
Contractor estimate: 25000
add 20% 6000
Purchase & Refi exp 5000
Total: $40000
Carrying costs for 7 months: $ 5000
Contractor estimate: 25000
add 20% 6000
Purchase & Refi exp 5000
Total: $40000
The most you would want to pay for this property
is $35000
Ideally, you would keep yourself at $30000 max
All based on thorough inspections, good repair estimates & after repair values.
Get yourself a market expert and...
is $35000
Ideally, you would keep yourself at $30000 max
All based on thorough inspections, good repair estimates & after repair values.
Get yourself a market expert and...
This method works.
A $75000 loan at 3.5% with Taxes & Insurance would
be approximately $600/month
A $100000 home lease range would be 1000-1200/month
A newly renovated home will rent quickly & have a lower
vacancy rate.
A $75000 loan at 3.5% with Taxes & Insurance would
be approximately $600/month
A $100000 home lease range would be 1000-1200/month
A newly renovated home will rent quickly & have a lower
vacancy rate.
