The Problem With The BRRRR Method
“What’s wrong with the BRRRR Method of real estate investing? Lots of people do it, why shouldn’t I?”
Well for starters, there are too many “R’s” :-)
Buy, Rehab, Rent, Refinance, Repeat.
Why not make it just BRR — Buy, Rent, Repeat?
Seriously — here’s why I don’t use this method:
- Most sellers can’t give me a big enough discount to make the numbers work.
This is usually because the seller owes too much. To make the BRRRR method work, keep in mind that the goal is to refinance the property after you fix it up and rent it. And banks will generally only lend you about 75% of the value.
So if you want to get all your money back out of the deal when you refinance (which is the whole point), you can’t have more than 75% of the value tied up in the property. Well, if it’s a big rehab project, that means you gotta buy it low enough to make that all work.
Well, what if the seller owes 80% on the house? Or 90%? Or 95%? or 100%? You’re passing on great deals just because you can’t get a big enough discount.
2. You have to deal with friggin’ banks.
This is a big one for me. I can’t stand dealing with banks in general, but especially when it comes to real estate.
There are several reasons for this:
Mostly because when a bank is involved, they’re the ones calling the shots, not me. I don’t know about you, but I like to be in control of my deals. Not some desk-jockey at Wells Fargo.
They have this pesky habit of wanting me to personally guarantee the debt. No thanks.
They don’t want me to buy more than a certain number of houses. Last I heard, they cap you at like 10 houses. Well what good is that if you’re trying to build an empire!
And then on top of that they want to have the house inspected and appraised and make me jump through a bunch of hoops just to prove the house is ok and I’m worthy of their gracious lending. ;-)
3. I stopped rehabbing properties a long time ago.
Man, it’s way easier just selling houses as-is. And I don’t mean wholesaling. I mean selling to end buyers.
So what do I do instead?
It’s called “Transactional Real Estate” — a new term I just coined. You like it? It’s gonna be YUGE. haha
But seriously — I live in this world between agent and investor where I have dozens of cash-flowing rental properties with no personally guaranteed debt, infinite ROI, and the tenants make all the repairs.
I have no cash tied up in any house — this is why I can’t really call myself an “investor” because that would mean I’m actually investing money into something. But I have no money in these houses.
And I’m not an agent either — I buy and sell houses strictly for myself, not for others.
I buy a property directly from a seller using some form of seller financing. I usually pay nothing down, or very little. I get some free equity (if there is any), and I don’t have to qualify for any bank loans.
The house is usually in decent shape, if not outstanding shape. It’s move-in ready, or maybe it just needs some updating.
Then I go out and sell it directly to a buyer using some form of seller financing. Usually a lease-option.
I get a big down payment from the buyer (5–10%+), plus a monthly payment until such time that they get their own mortgage and cash me out, at which point I receive the remainder of my equity.
I have zero cash tied up in any deal and I own the house (infinite ROI).
I get a big chunk of cash the day I buy it (or shortly thereafter).
I get monthly cash flow.
I get equity on the back end if they ever cash me out.
I get long-term capital gains if it takes the buyer more than 12 months to refinance.
I get no management headaches because the buyer takes responsibility for all repairs and maintenance.
The seller gets rid of a house they don’t want, quickly and easily.
The buyer gets to move into and enjoy their dream home while they’re working to get qualified for a traditional mortgage.
This is what I call a win-win-win deal. This is all I do.
I do 4–6 of these deals a month with a marketing budget of about $565/mo and I put in about 5 hours a week of my personal time doing this.
If this sounds like the kind of “house flipping” business you’ve been dreaming of, I think you’ll like the new webinar I just launched.
There is nothing for sale in this webinar.
Here’s the link to the webinar: https://blairhalver.com/webinar
WARNING: If you think this sounds too good to be true, PLEASE, don’t register for the webinar. I just get tired of trying to convince people about doing the real estate business this way all the time. I don’t care anymore. You either believe it or you don’t. It doesn’t affect me. [recites the serenity prayer]
It’s like that old Henry Ford quote, which I’m going to butcher here: “whether you think you can, or you think you can’t, you’re right.”
Alright, much love to you, my friend.
Until next time…
