Tarl, where have you been? You really have not been active on social media this past year. You are definitely the best among all the real estate podcasters since you give details on your real estate deals rather then just speak about mindset.
@sibdynasty11062 жыл бұрын
Long story short. It didnt cashflow after a Brrr. So he sold it instead and took the profit. Moral of the story “every brrr must be a good flip”
@JontheDon88122 жыл бұрын
Thank you sir
@tblaze8167 Жыл бұрын
Thank you!!! Haha
@rachybaby72 Жыл бұрын
Thanks.
@liberated_andblack959 Жыл бұрын
Thank you.
@JamesP292 жыл бұрын
I so appreciate the videos where it didn't go the way it was planned. Seems like nobody ever wants to say where they messed up.....you can learn just as much if not more from people's mess ups. This is very similar to the situation I'm in right now.
@darrellmendiola34952 жыл бұрын
Wow. My head exploded lol. Great info. I'm brand new and still in the research stage. I never thought about making sure it's a good flip first. Wow!! Love these podcasts!
@cpdv6882 Жыл бұрын
I appreciate the discussion of the negative and mistakes made because we are learning and thats what we're here for! Thanks Tarl for your videos and "keeping it real" 👍
@SirJulioG2 жыл бұрын
Man, truly enjoy watching this pro-bro break deals down. Thank you sir.
@oranuchchatsrinopakun18292 жыл бұрын
Thank you for a detailed math. This is really useful info. I am going into the conventional loan #9 and will need an alternative/ creative Financing soon.
@roadlesstraveledd2 жыл бұрын
real life case studies like this are much more valuable. thanks so much Tarl!
@pontusthegod88402 жыл бұрын
This was great! Really sat down & went through every part & all the numbers gave me a beautiful wide view image of all the aspects you have to analyze for a deal
@RosieThecarlady2 жыл бұрын
I cash out refinance 3 properties this year at 5.5, 5.8, %, 10 years fixe rate, because if I have a low payment and my tenants loss their jobs or have less hours , I can still make it through this uncertainty times , and no pre payment penalty after the 5th year to refinance. More cash flow , more cushion in case of emergency. In an other property , I converted the detached garage in a cute studio apartment, just make sure that it cash flows even in the worst economy. Buying right now 2 single family homes, and dividing in 2 , in order to maximize the income and the DTI, strong enough that I don't have to leave money on the table.
@HopeMcGrath Жыл бұрын
Excellent breakdown and I appreciate the authenticity as a good teachable moment for those of us want to do the BRRRR strategy.
@tyrellrutledge522 жыл бұрын
This is an excellent video. Please continue with the number break down and disposition type vids. This is what people who are actually do deals need to see. Thank you.
@JB-ie3vo2 жыл бұрын
Have Tarl on more!
@shepard3572 жыл бұрын
Great explanation of DSCR, thank you!
@kimhimes32442 жыл бұрын
I love the transparency and all the detail! Very helpful!
@SPL2 жыл бұрын
We closed our last deal in Feb with a 4.375% Could have locked it at 3.9% in Jan but never thought they would go up so fast. $800 cash flow luckily and will be our last BRRR for awhile.
@sexweightsproteinshakes2 жыл бұрын
i just for one around 9:((
@claytonjames4779 Жыл бұрын
I was in your situation at the same time and I ended up buying a house that was a three-bedroom one-bathroom 1100 square foot but it had a quarter acre lot. It was a decent flip if I did it but the whole reason I purchased it was not to flip it but to build two more adus on the property in the back with a second driveway so the additional rent will change my balance sheet. The great thing about this is I don't have to worry about getting new loans if I have the money and I don't have to acquire any new property to make the property produce more income. Plus I started out doing the brrrr method by doing a lot of the fixing myself so I can play general contractor
@Christian-sg1og10 ай бұрын
How would you build 2 ADUs if this would be your first BRRRR and you have no more money?
@samr88272 жыл бұрын
The other option which he didn't do math for was keeping the rental without refinancing. 200K @ 4.25% probably would have positive cashflow, but the CAP was likely too low for that to work for his strategy. If a BRRRR fails in a place where rent is rising, holding onto the property while it generates positive cashflow tied to a low interest rate may not be the worst position to be in.
@Groovmaker2 жыл бұрын
True, but he didn’t want to leave his cash in the deal.
@nellosnook44542 жыл бұрын
Excellent video & information! 👍
@JohnJohnson-yc7wv2 жыл бұрын
I appreciate your help and knowledge. Great breakdown for me of the numbers. I’ll listen 5 more times now.
@mmartinez41172 жыл бұрын
Need to hear more examples of how it didn't go as planned and what you did in the end.
@shaybae49182 жыл бұрын
Are you safe? You keep looking over to the left like somebody is watching you lol. Also, your watch is flipped 😅 GREAT VIDEO THO! Love what you did with the remodeling 😬
@Derinnegan2 жыл бұрын
Lmfao😂
@TheForexApostle2 жыл бұрын
Your advice and expertise are much appreciated. For me, this is an excellent explanation of the statistics.
@mordykatsevman81612 жыл бұрын
Another Amazing video! Why are the rates significantly up, if the fed only raised it by 0.5%?
@chodge83662 жыл бұрын
great video and lesson💪🏽
@The1SimLash2 жыл бұрын
Good video Tarl but I don't understand your apprehension about an ARM. Almost any large multi unit deal will also be an ARM and some of them balloon 🎈. It's the norm so why avoid it? Also your original BRRR numbers are not that good. $250 in monthly gross profits before accounting for *any* expenses is not good at all imo.
@nickbrunette8292 Жыл бұрын
Awesome explanation of this. Great video man keep em coming.
@andrewm11672 жыл бұрын
Super clutch video
@ioncergarealtor2 жыл бұрын
awesome, love your videos, becouse this is practical advice that i can take and implement here and today.
@johnnyb33good212 жыл бұрын
great breakdown! & great explanation 👍 👏
@ebenezerfagundes10012 жыл бұрын
Excellent and didactic BRRRR video!
@NLTJNET2 жыл бұрын
Thank you so much. Very eye opening and informative.
@billstephens54722 жыл бұрын
Fabulous as usually.
@CyndiLH Жыл бұрын
So interest rates are going down now :) (at least in Canada, 5 yr fixed rates are dropping) but awesome video!! Wish you could do an analysis from a Canadian context where our loan periods are not equal to our amortization periods. We have usually max 5 year term (but can do as low as a 6 month term) based on amortization period of 15, 20, 25, 30 (whatever) years...
@sameersmerchant2 жыл бұрын
Very good explanation. I’m running into the same issue
@Bradtaylorphotographic Жыл бұрын
Yep, almost no deals I'm analyzing will cash flow on a BRRRR with these interest rates.
@javiernavarro36952 жыл бұрын
It was a win win 3,000 negative cash flow annually is nothing We still have inflation +30,000 to his value when he can finally get refinance at lower interest rate plus by then he already increase the rent to break even or start cash flowing
@paulywalnut33642 жыл бұрын
That's just the net... I read 10% of the rent goes to the property manager. Not to mention trash and landscaping. Idk. Also, leases have me confused. I imagine 1 plumbing job could destroy business. So a good lease prevents that? If so, even with section 8? I hope so. Basically bulletproof your rentals. However, since we're back to flipping, we could then save some budget ;-}... For now, patience and persistance. Great video dude.
@tylermundy79852 жыл бұрын
Good stuff!
@ChrisJones-cc1ti2 жыл бұрын
Great video
@davidr45232 жыл бұрын
Several thoughts 1. Tarl is the best podcaster since he gives specific details on his deals rather then just give you a motivational talk that you can do real estate deals to. He is selling nothing. 2. If Tarl has all of these financing cost, why doesn't he use his own money to invest? He is a very rich guy and with his great reputation and deep connections people are throwing money at him. Myself and many others would have no issue in loaning him money at 5% to 6% per year rather than leave it in the bank or lose it in the stock market. 3. Who says the maximum rent is just $2,250 per month? If you add a storage shed in back, fully furnish the apartment or add an ADU you can greatly increase the rents. 4. Tarl says that he could put his money elsewhere and earn a higher return. Is this true? The last several years, finding deals and especially rehabbing has been extremely difficult. So if you find a good deal why sell it? 5. Tarl never makes any calculation for appreciation in his transactions. So if Tarl will truly lose ($250 per month approx) so $3K per year, are you saying that this $400K home will not even appreciate 1% a year? In 5 years this house could easily be over $500K
@alparun45712 жыл бұрын
On p.5. One need to understand where you are in the market cycle to make assumptions on appreciation. If we happen to be near the top and you brrrr leverage is going to work against you. That's how a lot of investors lost money at GFC
@HappyPenguin750342 жыл бұрын
80k net? What about short term capital gains plus your taxable income?
@tarlyarber2 жыл бұрын
You get taxed as ordinary income on flips. Not short term cap. Also, everyone has different tax situations so we don’t quote that part on these videos, the “project” net is what it is
@HappyPenguin750342 жыл бұрын
@@tarlyarber how no short term cap gains? I don’t flip so my question.
@armandomartinez56052 жыл бұрын
PIT&I with the 4.25% example he has at $1997. The 6.5% example at $2481. Both on 30yr fixed. When I plug those #s into a basic mortgage calculator, I’m getting $1868 and $2315, respectively. That’s assuming the loan amount is $318,750 (75% of Appraised value). Am I I missing something? Where is the discrepancy coming from if we’re not accounting for CapEx or Vacancy?
@paulcionczyk9717 Жыл бұрын
Armando- There is a slight discrepancy in the calculations in the video which I also noticed. He states he assumes $315K loan but he is running his numbers on a $345K loan. I assume when he did his math for the loan he added in his $30K in selling costs to get $315K plus $30K to equal $345K, which is not correct since he doesn't realize those costs until he sells so wouldn't be borrowing that much more. So on $315K at 4.25% he mentions his payment is $1697(P+I) and adds $300 for taxes/insurance. If you run that in a calculator the P+I on $315K is $1,550 but only at $345K do you get the $1,697 principal and interest he mentions. The $345K is also used when he runs his numbers at 6.5% which gets you the $2,181 at 6.5% but on a $315K loan at 6.5% it actually is only $1991 so a difference of $190/mo. All in all it's a great video and he would still end up at the same conclusion with these numbers. Hope that helps clarify.
@ssj5992 жыл бұрын
My mentor was saying this weeks ago. Thats crazy
@lausypulls62622 жыл бұрын
BP once again gives us free game. Great vieo
@dhowto30052 жыл бұрын
This was a great video!
@HeinenJoe2 жыл бұрын
Do you always not budget mx, cap ex, PM, etc? That seems pretty gusty
@saycheese18322 жыл бұрын
I was wondering the same thing. This wouldn’t have worked for me. My understanding of cash flow is after capex, pm, mx, etc.
@GriswoldFamily2 жыл бұрын
It a "Brand new" flip so Cap-Ex will be zero for the next 10 years and they do their PM internally. We do the same. But, I am nervous not leaving something for vacancies. Even so, with an infinite BRRR, you have zero dollars invested, so a ZERO NOI is fine. I would do that all day long. You are still tax-incentivized and your tenant is increasing your equity.
@saycheese18322 жыл бұрын
@@GriswoldFamily gotcha! I totally missed that part. I was multitasking while listening to this podcast.
@jgn19772 жыл бұрын
I'm a simple man, when I see Tarl Yarber's mug in a BP thumbnail, I click, comment, and like the video. Best guy making BP videos hands down.
@nixanne5619 Жыл бұрын
This is a great video, but just throwing out the numbers off the spreadsheet you're reading is confusing for the audience who can't see your spreadsheet.... Any chance you could share the spreadsheet template to calculate the DSCR 😊 Thank you!!
@frostithebarber9728 Жыл бұрын
Dscr is just your PITI divided by your gross monthly income from the property
@lejia79982 жыл бұрын
That is a lot of Math!!!
@brownsugga2584 Жыл бұрын
Maybe I'm a little confused. After buying the home for $200,000. You put in $88,000. The home sold for $80,000 net. How was this a profit?
@brianbarrow6568 Жыл бұрын
Brian B. Tucson AZ. You were say that you made 80,000 on the deal, but how much did you have to pay in capital gains 🤔!??
@chf1594 ай бұрын
So when you refimance, you do a 1031 exchange?
@Christian-sg1og10 ай бұрын
I'm looking for my first BRRRR deal....I noticed that even if you were able to get your 4.25% on the DSCR you wouldn't be able to have cash flow since you didn't consider vacancy,mantainece,CAP Etc... That is what makes all my deal calculations to become "bad BRRRR deals" .. Does DSCR Loans calculates vacancy,maintenance,cap to get 1.1 - 1.2 DSCR?...do you really need to consider this costs on top of you PITI? ...If so,it looks like we need to start buying below 65% in order to come out positive for an infinite BRRRR...Can you please explain?? Thanks
@alisongirroir82982 жыл бұрын
Great video!!!!
@orenkachel87502 жыл бұрын
Why not take the ARM, and sell the house before the intrest change?
@michaelbatista28692 жыл бұрын
Getting money and making payments for it at this point seems to be the only way this will work out
@rollowbar2840 Жыл бұрын
Why leave out your down payment on final numbers? I feel showing that info would be great for your viewers.
@ronnyvarghese2 жыл бұрын
Tarl ~ any DCSR lenders you recommend which are on a national level? I’m located in Nashville and have 2 flips going on right now that I’d be interested in doing this for!
@jameygrimes33812 жыл бұрын
Wilson Bank & Trust, Simmons Bank, Tower Community Bank, Sumner Bank & Trust. We are in Nashville also. We’ve used Simmons and are currently working with the others listed.
@altar78852 жыл бұрын
Where is this? The rent seems incredibly high for something that looks more like a trailer
@GriswoldFamily2 жыл бұрын
Most everywhere in America today!!
@HappyPenguin750342 жыл бұрын
@@GriswoldFamily true
@altar78852 жыл бұрын
@@GriswoldFamily Scary
@jacobportalatin2 жыл бұрын
I have been thinking of this. Essentially, if you BRRRR even if the rate goes up 1 or 2% but still cash flows it makes sense still to BRRRR to pull out the initial investment? Good to know.
@ASHOKA12022 жыл бұрын
Instead of refinancing can u use the equity you built and pull that out?
@edwardnguyen4362 Жыл бұрын
What if you can not flip at 425k ? Or it will take a while to sell...let's say 6_8 months. How to manage your cash flow ?
@GriswoldFamily2 жыл бұрын
Awesome video. We are making the same decisions now as well. One correction needed: At @21:25, your PIT&I on a $275k loan is $2,025 with a rent of $2,250. So, although you are leaving $40k in the deal, your cash flow would be POSITIVE $225 with the 65% LTV loan (not a negative $231-- that was based on the PIT&I of the 75% LTV loan) . So, with the corrected PIT&I , you would be net $2,700 per year on a $40k investment, which is a 6.75% APR. That's barely overcoming inflation, but in todays market, that's not a bad locked in return rate. Plus, you have depreciation incentives, potential long term asset appreciation, and your renters are building your equity position.
@The1SimLash2 жыл бұрын
You're okay with a 7% ROI? *Raise your standards*
@tizianatrojani63012 жыл бұрын
it is negative.. your total cost (PITI) is 2181+300=2481 minus your rent of 2250 equals negative 231
@tizianatrojani63012 жыл бұрын
it's rent minus cost...sorry for the typo (2250-281)
@GregVasil2 жыл бұрын
Tarl, why not raise the rent to say $2,400-2,500 and be cash flow positive or break even? I mean it's freshly renovated, etc.
@paulshughart65442 жыл бұрын
Great stuff! How did you handle the terms of the DSCR loan? Typically there is a pre-payment penalty and if you flip the property did the numbers still come out to $80,000 profit?
@mmartinez41172 жыл бұрын
I'd like to know that too. Can uxshare with us all?
@mmartinez41172 жыл бұрын
Great info thanks
@rayjou7422 жыл бұрын
He never got the DSCR loan. He paid for the house and rehab with cash, then sold it.
@juliapereira53552 жыл бұрын
@@rayjou742 so do you think did he sold it for $495K ($315k+80K) - as he mentioned that he received $80K net profit??
Interesting, towards the end of the video Tarl mentions that he is confident interest rates will not be going down anytime soon so he recommends getting the 30 year fixed rate option. I've heard a counter opinion from some other smart people in the industry that the fed's continued push to raise rates will throw us into a recession, and if/when that does happen, it's almost a guarantee that rates will cycle back down as that has always happen during or after recessions. I guess the way I could see if playing out with Tarl's theory is if raising interest rates does not help to curb inflation then the fed would just keep them high. Hopefully it doesn't take more than a year or so to tame inflation but we shall see, not looking good at all so far
@hazell034 Жыл бұрын
my problem is I don’t have w2 income that is high enough to afford the refinance due to DTI
@shakstarr2022 жыл бұрын
Solid!
@adambaker40872 жыл бұрын
I would like to know more about the initial financing. Most folks use hard money for a BRRRR or flip b/c the closing costs are much lower. You said you used the asset based loan instead of conventional... is that typically similar closing costs? So for a BRRRR you'd be paying high transaction fees twice!
@huckfin15982 жыл бұрын
They’re not GIVING you the cash out. They’re LOANING it to you 🤦🏻♂️🤦🏻♂️🤦🏻♂️
@kingalainc12 жыл бұрын
Well technically you are correct, however your Tenant will be paying it off for you so technically you are also wrong at the same time.
@brownsugga2584 Жыл бұрын
yes!!!!
@brownsugga2584 Жыл бұрын
@@kingalainc1 you would then be banking on always having a good tenant smh
@edwinmachado79642 жыл бұрын
I missed tarls content 😁
@Obamacain92 жыл бұрын
Every Brrr must be a good flip, but every flip is not necessarily a great brrrr , wow what a concept ( LOL)....I totally agree with that accessment, however I disagree with your final out come... you really didn't have to sell because the rental numbers didn't work..... rather if you analyzed what the highest and best use of the property was after you did that marvelous renovation/ staging job .... you would've realized that there was a number of things you could've done to make that 'baby' cashflow. For starters you could've Airbnb-ed it & turned into a short term rentals, you could've also done midterm rentals i.e renting to corporate America, traveling nurses, insurance companies etc, you could've also turned into a group home for seniors or you could've provided affordable living space by turning into a co-living rooming facility by renting individual rooms which many local municipalities around the country are beginning to see and support the need for this because of the skyrocketing rent all over the nation. As you said at the end you should never sell even when rates are trending up .... on that point you were absolutely correct !
@casj73282 жыл бұрын
What i never understand in the BRRRR video's is; when do you pay your investor's interest. In every video they just pay the investor's initial investment back through the cash out refinance and keep the rest. But a investor (private or hard) wants more back that his initial investment. So am I missing that, or is it not mentioned? Thanks
@zsoltnagy47002 жыл бұрын
well probably they already have the money for the downpayment (20%) and for the rehab, the rest (80%) is probably from the bank....but yea when you use it 100% other investors money than you should have calculate with that too...
@alexdinsmore7392 жыл бұрын
Lets go in the Sway side haha
@Sectionmillionaire-fg8mm Жыл бұрын
Interest rates at 7% make things more difficult. I can’t see them dropping down any time soon. Money getting more expensive to borrow
@davidleslie62072 жыл бұрын
I would disagree with the comment "every great BRRRR is a great flip first".
@Guilherme-mp8lc2 жыл бұрын
Whats the best websites to find homes ??
@RosieThecarlady2 жыл бұрын
Is the brrrr strategy dead?
@aliciadelacruz14612 жыл бұрын
How do you feel about using a HELOC for repairs? I was looking at doing a 203k but interest rates are higher than investor loan. I’m currently on the hunt for a property to be our 6th rental. Hubby is always afraid and the investor rate I was given of 6.625 sucks! I’ve sorta done the BRRRR method before, just not the refinance because I was able to pay cash for it, only 52k. I’m glad I got to see this and learn for todays market.
@frostithebarber9728 Жыл бұрын
If you go with a dscr loan you won’t have a negative cash flow I think you made a mistake, that’s the point of it, your profit is that .2
@sftrail42352 жыл бұрын
Lets do the BRRR - excellent opportunities for the brave ones
@user-nk4bv5ux5z Жыл бұрын
Are you financing the rehab costs, the $88,000? So your first mortgage was $315,000?
@yoooyo7936 Жыл бұрын
is there a way to get a mortgage on a brrrr if I dont have an income?
@thomasfeldman3613 Жыл бұрын
No
@Eightohh4tosevenfive7 Жыл бұрын
There are ways if you have REALLY good deals and can show how much money it will generate. Not a regular bank or hard money lender though I suggest networking at a REIA meeting.
@claytonjames4779 Жыл бұрын
$80k net doesnt account capital gains
@adambaker40872 жыл бұрын
Wait a sec… rent is 2250 and PITI is 2025? Where do you get “negative cash flow???”
@imnickcooley2 жыл бұрын
He’s taking into account vacancy and repair reserves, plus management fees etc. Taking each of those into account he’s losing money monthly.
@Temurmemer2 жыл бұрын
Interest only brrrrs that you sell every 5 year with a 1031
@floridaleisure9847 Жыл бұрын
love it
@theforce51912 жыл бұрын
I get that you can possibly get all your money back out after the refinance. But aren't you technically paying interest on that money? Ex: if I put 10k in a property and refinance to get that money back out, I'll be paying interest on that 10k since it's part of the mortgage now. So you're technically losing money every month.
@chrissimms18022 жыл бұрын
correct but the basic idea is you have now pulled out that 10k or whatever the amount to go invest and purchase another property and rinse and repeat the process. Now if rates get too high it becomes much more difficult compared to 3-4% rates which made a lot more sense often to pull the funds out and go invest it again to earn more and accumulate properties faster
@dhansen2 жыл бұрын
While you are correct, the point is that you (if you do it right) will be able to make a higher return on a subsequent real estate venture with that cash. i.e. If one could borrow money at 5% and deploy it (BRRRR, flip, rentals etc.) and receive a 12% return all day, I would personally borrow billions if I could to get that 7% wedge.
@theforce51912 жыл бұрын
@@dhansen ah, so positive arbitrage is where this will benefit you if I understand you correctly? Pretty much making money off of the money you owe i.e: 5% apr vs 12% return.
@GriswoldFamily2 жыл бұрын
The tenant is paying the interest on the $10k. If you leave it in equity, you get no advantage. If you pull it out, you are not paying the interest (your tenant is) and you get to re-invest that cash.
@Jameslefrancais Жыл бұрын
Did you just say 600 flips in 1 year 😳
@miltonali44192 жыл бұрын
INTEREST RATES Is cooling things down. a 175k FHA loan on a 5.5% rate is 1200/ month. In Louisville that's a bit much for the average consumer can bear.
@inthemidwest3514 Жыл бұрын
dude put in 80,000 dollars and now wants almost half a million for that little house. GTFOH bro not paying that much for a homedepot makeover.
@lukepowell55342 жыл бұрын
Bbrrrrr is bullshit unless u have cash.... Cash, not hard money,- cash..... If u have cash it's great
@kingalainc12 жыл бұрын
Even with cash I would still use other people's money
@jgn19772 жыл бұрын
23:44 Your numbers are a bit off there. With the 6.5 interest rate and leaving 40k in, you said the PITI is 2025 which would cash flow you 225/month. That would be a 6.75% return on your 40k not a negative return. Not saying 6.75 is great or that you did the wrong thing by selling but the comparison to 75% cash out which gives negative cash flow and 65% cash out witch gives 225 is clearly misstated at the end of the video.
@GriswoldFamily2 жыл бұрын
Exactly!!! I just commented the same thing.
@HappyPenguin750342 жыл бұрын
Not good if you get numbers wrong. Ha.
@evgenyonishkevich84942 жыл бұрын
👍
@RagnarLothbrok22222 жыл бұрын
BRRRR method sucks, and sucks even more now that rates are sky high
@rcruz4012 жыл бұрын
Do banks factor a percentage for personal living expense other then the NOI when factoring your DSCR?
@GriswoldFamily2 жыл бұрын
No. The DSCR (hard money, no-doc, asset loan, etc) look at the asset and your previous experience within the asset class. In my experience, they do not ask about your personal financial status (other than your credit score). In my experience, In-house loans at a local bank are basically traditional loans that are not going to be resold on the secondary market. So their underwriting can be more creative in analyzing your personal finances, but unlike the hard-money, they are evaluating your personal finances.
@rcruz4012 жыл бұрын
@@GriswoldFamily OK. Only because I submitted an application with a local bank (Credit union) for a Commercial Multifamily and aside of financial statements ect. they are asking for 3 years personal tax returns and credit score. So they are going to scrutinize my DTI considering I have 85% utilization on credit cards and my heloc being that I used them for my rehabs on the property I'm doing the Cash-out-refinance for. I do look to paying those off with the money if all goes well.🤞🏽
@rabiesman8882 жыл бұрын
Thumbnail of video is soyjack
@brandenleeyang222 жыл бұрын
BRRRR is probably good, but you won't be able to refinance and get your money back. The markets lower in price when interest rates hike, so if you bought a run-down property for 400k at 4.5% interest rates, you'll prob put 80k in renovations. 6 months later, it'll be 600k or more, but if you bought the run-down property with interest rates are higher, that property will typically be 200k and we can assume a 7% interest rate, renovations are still 80k, 6 months later, it'll be 400k, but you can't really take your money out. If anything, it's better to just buy the property at market price. BRRRR is good when interest rates are 0%, but bad when interest rates are 10%. Today, interest rates only rose around .5%, it's not bad compared to 1940s-1970s, they used to been 25% interest rates. The question becomes, would you rather have added 200k on a property that costs 100k, but interest rates are 10%, or add 200k on a property that costs 800k, but interest rates are 1%. BRRRR is good for low interest rates (assuming you could get people renting profitably), bad for high interest rates. Flip is good for high interest rates (assuming it's sold), but bad for low interest rates. High interest rates hurt flips by reducing the chance it's being sold, basically, why buy a house on a mortgage of 400k with monthly payment of 8-9k when you can rent? Low interest rates hurt BRRRR by reducing the chance it's being rented, basically, why pay 2k for rental, when you can pay nothing on mortgage? In order to know if a BRRRR is good or a flips is good, you need to know if the market will have high or low interest rates, and if they can afford more single-family houses in the future. Today, it's better to BRRRR because interest rates can get up from 4.5% to 7%, if interest rates were going to be 4.5% to 2%, then it'd be better to flip. They're both converse when it comes to BRRRR vs a flip. This only applies to mid-low income areas with households that make 80-90k to 60k per year. If we are talking about high-ultra high income areas, then a flip is always favorable, you can't get a BRRRR rent of 10 million dollars each year for a billion dollar property, but you can't get a house for 200k and flip it for 300k because renovations are constant so it's always 80k. Basically, if it makes sense to buy a house in the market, then flip. If it makes sense to rent a house in the market, then BRRRR
@GriswoldFamily2 жыл бұрын
The decision between flip and BRRRR is more than just interest rates. BRRRR are tax-incentivized whereas flips are tax-disincentivized. Also, on a BRRR, the tenant is building your equity position passively as well as producing a dividend. And, the rental market is in no way predicated on mortgage payment vs rental payment.. That might sound nice on paper, but it does not translate into the real world. People choice to rent or buy is rarely based primarily on comparing mortgage expense to rent. Another point that your analysis appears to be based on, is that is is an either or choice. I can rent my BRRRR out until the day that it doesn't make financial sense and then I can flip it - gaining on both sides.
@ericjames78192 жыл бұрын
There are plenty of good BRRRs that would not make good flips. These high end properties almost never make good rentals.