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An Intro to BRRRR Real Estate Investing [Fixer Upper Rentals!] - YouTube
Channel: BiggerPockets
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You know what I really like about ligers?
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Picks the best traits of lions and the
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best traits of tigers and combines them
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into one beast and you know something else
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that combines the best of two things
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into something totally new and totally
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cool? BRRRR real estate investing. You know
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it's the perfect cross between house
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flipping and rental property investing
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it takes the benefit of both and make
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something incredibly powerful that could
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help you build millions of dollars in
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net worth plus significant monthly cash
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flow in shorter time than you ever
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thought possible. Well my name is Brandon
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Turner co-host of the BiggerPockets
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Podcast and author of the Book on Rental
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Property Investing and today I want to
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give you a brief overview of how to
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invest in fixer-upper rental properties
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using this BRRRR strategy. Hang tight...
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So BRRRR stands for Buy, Rehab, Rent, Refinance,
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and Repeat. It's basically the strategy
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where you find a nasty property and
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then you buy using short-term funds, fix it up
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pretty nice, put a great tenant in there
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paying top dollar, refinance it to get a
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nice long-term mortgage, and then repeat
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the process over and over. Now, if you're
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confused don't be. I'm going to give you a real
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life scenario right now on a recent BRRRR
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deal that I did. Now, this is the Cedar
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House, so i bought it for seventy
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thousand dollars then I used a private
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money lender - somebody I met on Bigger
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Pockets while networking - to fund the
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deal and to fund most of the rehab. Now
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including holding costs and other
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expenses we spent about thirty five
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thousand dollars fixing up the property
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and man was it nice. The house rented in
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no time to a great tenant who paid on
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time every month and was super easy to
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work with. Then we went to work
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refinancing. Now, typically a bank is
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going to want you to wait at least six
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months after getting to purchase before
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they'll give you the loan and sometimes
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they want an entire year, just be sure on
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that when your calculate your numbers
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when you're doing a BRRRR analysis. So
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after the time the house appraised for
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close to 150,000 and I was able to get a
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brand new loan to pay off the short-term
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lender with a long-term mortgage and
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drop my payment by one hundred dollars a
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month. Now at the end of the day I kept only
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a few thousand dollars of my own cash in
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the deal and going forward with cash
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flowing every month. Now, besides that
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story why is BRRRR so cool? Like I said
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it's kind of a hybrid between flipping
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and renting - it takes the benefits of both
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and reduces the risks of both, so I can build an
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instant equity in my property which adds
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to my net worth, but I can wait until the
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market is where I want it to be at the
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peak to sell. I can also get monthly cash
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flow from a great tenant because great
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houses attract great tenants.
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Furthermore, my repairs and Cap Ex are
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reduced because the house is
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rehabbed already. Plus, as a BRRRR property
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I can take advantage of long-term
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capital gains tax which means I pay less
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taxes than a flipper might. And finally...
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BRRRR investing allows me to buy real estate
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without using much of my own money, so
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I use a private lender to fund the deal
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and hopefully the repairs and I use a
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long-term mortgage to pay off that
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private lender. Now I've done numerous
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BRRRR deals in my life where I didn't
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even put a single penny of my own cash
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into the deal. Finally, BRRRR can be used
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with single-family houses, small
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multi-family, large multi-family, and even
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commercial properties. But, of course, BRRRR
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investing isn't without some risks. So
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what if you can't get the refinance or
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what if the appraisal amount doesn't
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come in high enough? Typically a bank
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wants to you know they don't already
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finance the whole thing nearly seventy
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percent or what if you do the numbers
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wrong? As with any investment there are
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risks. However, here's what I love about
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BRRRR. You can minimize the risks by doing
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your homework. Now have I spoken to a
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local bank to make sure I can qualify
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for a refinance? Have I determined what
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the after repair value is by looking at
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recent sales comps other properties that
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have sold? And have I run the numbers
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properly to ensure that I'm going to
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have enough equity to get the loan and
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that all the numbers are going to work out
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right. Now in doing your homework you can
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minimize your chances of something going
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wrong with the refinance and furthermore
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I love the fact that if I couldn't get
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the refinance I could just sell the
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house and likely still make a profit and
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speaking of doing the math be sure to check
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out the BiggerPockets BRRRR calculator.
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You can run the numbers on your next
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BRRRR deal in under five minutes and
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estimate your cash flow, equity, ROI and
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much more - plus the downloadable PDF
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reports are perfect for presenting your
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deals confidently to private lenders,
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banks, partners, your spouse and it's just
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amazing. So check it out on BiggerPockets.com/analysis
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if you've not yet used them.
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Now if you want to learn more about
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the BRRRR strategy I want to invite you
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to a free online class that I'll be
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hosting this week here on BiggerPockets.
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We'll be discussing the BRRRR strategy in
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minute detail to help you prepare to do
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your next or maybe your first BRRRR
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investment. Just head to
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BiggerPockets.com/BRRRRwebinar
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BRRRR with four r's. And sign
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up. So I wish you the best of luck on
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your future BRRRR deals and as always
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stick close to BiggerPockets and your
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journey towards becoming a real estate
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mogul. The BiggerPockets forums are free
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to post questions any time and we're putting
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out new videos every week on the Bigger
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Pockets YouTube page so be sure to
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subscribe to our channel there. Now for
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BiggerPockets.com my name is Brandon...
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Signing off.
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