BRRRR Method Myths That Are Making You BROKE

how many bits do you believe about the mortgage industry is there a chance you've been running around with that info in your head that if you got right could actually make you a lot of money in real estate you've also heard that perfect is the enemy of progress and they can very well be true sometimes we get stuck in analysis paralysis because we're trying to do everything as perfectly as we can we've come to the right place on the Bigger Pockets mortgage Monday my partner Christian and I dispel these mortgage myths and you might be looking at Birds the wrong way how Christian and I look at them and how we've helped thousands of other clients to look at this in a better life and then give you the truth so you can make better decisions all that and more coming up on today's show of mortgage Mondays what's going on BiggerPockets fandom you are in for a treat today if you're looking to learn I'm David Green host of the Bigger Pockets real estate podcast here today with my partner in the one brokerage Christian batchelder here to bust more mortgage myths Christian welcome to the show how are you today pretty good happy to be here glad to hear it all right let's get into this thing myth number one I want to bur my primary residence isn't this a great idea yes one we get a lot kind of shockingly and I think people forget the ultimate point of Burrs is to buy a property and get most of your money out where with the primary you can put three to five percent down to start right so you're kind of already at the exit of the Burr in most cases now is there a value to you know value-adding and you know bettering the value of your property of course but using that burst strategy particularly for that Cash out refinance at the end you kind of already start with that really high leverage right which you kind of have the fast track right you don't always need to borrow primary that's a great plate ideally you want the juice to be worth the squeeze and Burge though they're great we love them we do them all the time they're work there's no way getting around it you can get a home for three and a half percent down you don't have to go through the headache of a rehab try to find a fixer-upper managing a contractor going over the timeline having things go wrong and losing money just buy a primary residence every year if possible which leads us to mortgage myth number two Burrs are supposed to be perfect did someone fail if they did not have the Burfict deal this is by far the most common question we get with burrs when people say the perfect Burr that means they're able to cash out a hundred percent of the money they put into the deal right so whether that's a down payment and the Renault or if you're just refinancing maybe just the rent out but that doesn't mean you fail right I mean if you can get 75 80 of that cash you put into a burback out that's still a win you still ended up putting very little money down to acquire that property you know some people even shoot to cash out more than you put into the project obviously that's an absolute Grand Slam but no I would definitely not classify a burr as a failure if you do not get 100 of those funds back it's still a very powerful strategy yeah I've been preaching this from the Raptors for years and said Raptors not Rafters I've been preaching this from the rafters for years the Baseline for a successful Burr is not that you got a hundred percent of your money out that is an incredible deal and if you get more than your money out so much the better but that ends up being the only examples that get talked about someone comes on a podcast they want to share their huge wins the one deal out of 10 that worked out that way and everyone thinks so that's what you're supposed to do no a win and Burr is anytime you get more of your money out of it then you would have spent if you just bought it traditionally so in other words if the loan to value is advantageous through a burp that it would have been if you just bought it and then dumped all your money in the rehab that's a win you did better now of course there's big wins there's small wins there's medium wins but it's still a win so quit thinking that you failed on a burr if you didn't get all of your money out normally you'd had to put 20 down or more you had to pay whatever 30 to 100 000 for a rehab you can just get your rehab money out of the deal and you're still 80 loan of value that's still a huge win it's the equivalent of putting 20 down so remember that everybody it doesn't have to be perfect all right mortgage myth number three running someone's credit will ruin their credit score Christian what say you about this terrible mortgage myth yeah super common objection that we get a couple different ways to solve it number one guys when you run your credit it doesn't hurt you the way you think it does usually it hits you one to three points but every month of successful payment history you build up increases your score by one to three points so you're basically setting yourself back one month of credit report that's the benefit of obviously getting you a pre-approval to potentially get you a new property that's worth it and lenders on top of that have set protections to make sure that you have some flexibility in your credit score by pricing in Brackets of 20. all I mean by that is if you have a 700 to a 720 you get the same rate so dropping from a 720 to a 717 is not going to significantly impact your loan and in the event you flip over those brackets we have credit restoration services to get you to the next one but absolutely not to the level that people think running their credit is detrimental to their file it's not the case now when you drop from a 720 to a 717 hypothetically here does it stay a 717 for the next four years absolutely not that's what I was saying with every payment of good payment history you're getting that one to Five Points back anyways and you guys try this with your credit right pay your credit cards and see your score go up right keep your balances low see your score goal credit is on this revolving basis every month I can tell you guys just personal experience being a broker getting approved in multiple States and buying a number of properties that that I do I have I think 26 inquiries on my credit report in the last 48 months in the last two years and my credit's 780. so like if pulling your credit hurts credits it's not happening to me right so just keep that in mind that's more than one a month that I've gotten the last two years still have good credit at a certain point yeah right like if you just were massacring your credit every two months writing it again in perpetuity it could get to a point that you couldn't keep up with but nobody ever does that that leads us again into mortgage myth number four my score drops every single time I run my credit so if I've already run it with one broker I shouldn't come to another broker to do the same thing yeah and definitely a myth and the mortgage industry is built for people to get multiple quotes right Experian TransUnion X facts all the credit bureaus understand that typically there is a 30 to 60 day grace period there were multiple mortgage credit inquiries will count as one so you could go to Chase Wells Fargo us right and you can get multiple credit pulls and it will only impact your credit one time now just like David was saying earlier if you go run your credit in perpetuity yes that 30 to 60 days is always kind of rolling over people think like oh does it just then because I reset the clock no but if your mortgage credit pulls are actually converting into purchasing houses it's actually good for your credit long term because you're building up installment debt you're building up a good payment history what can hurt you and why mine didn't I use my example of 26 and 24 months is that I actually went and bought stuff right so I'm offsetting my credit polls with good payment history and now I have so many credit accounts that like every month I make one good credit payment like it's really good for me right don't just go pull your credit every month to keep your pre-pro up to date and never buy a house right that's not good for your credit right yeah that's a good point a lot of people get put in touch with their load officer whoever it is through someone else that's a person on Bigger Pockets it's a name they've heard it's their Realtors recommendation but your realtor often has no idea how loan stuff goes they barely know how to do their own job I can say that confidently because I am one of them and I see exactly how but your competence lives in that realm so if you're hearing this and you want us to run your credit and look at your loan and see if we get you pre-approved or you have another person who came across your path at a Meetup and they sound like they know their stuff if you read it what did you say it was was it 45 days it's usually 30 to 60. if you follow it definitely within that 30-day window have another pre-approval issued by another lender see if you like them more see if they have better loan programs and there's no penalty to you and that really came about from the last mortgage meltdown that we had that led to a horrible financial crisis where I believe it was the Obama Administration put it into law that we don't want people running their credit and afraid to get another quote from another lender because of predatory lending out of fear that their credit was going to take a hit so they made it so you have that 30-day window to do so without it now personally no one asked me but if someone did I would say this is a stupid way that we do credit in America it makes no sense to me that if you want to know what your credit score is that you get dinged for that it's like a big charging you every time you check your account balance I don't understand it oh you look to see that you have 700 in the bank we're going to take five bucks away because you looked I just I don't understand why they do that but they do I also don't understand why these three companies what is it a Equifax TransUnion experience thank you Treasury experience they are private companies that control exactly how credit works in the entire country there's a lot of things they don't take into consideration if you've made Utility payments on time if you've made rent payments on time there's a lot of things that aren't official lines of credit that do not get factored into this that really should if you're looking at the whole picture so the whole credit system is kind of a scam so find yourself a loan officer that knows how the stupid scam works so they can protect you from the downside so that you can scam the scam scam the scam that's exactly right you got to learn how to play this game if you want to make money in our world and that's what we're teaching you here at Bigger Pockets all right mortgage myth number five I can't wrap rehab costs into my loan there's the loan and then there's the rehab they will always stay separated like an angry married couple that sleeps in different bedrooms Christian is there a way that we can take these two couples and have them sleeping in the same marriage bed again yeah there are but I want to be very specific here I'm not for every loan product right so if you're just getting a standard conventional loan an FHA loan a uh dscr loan all these things that you've heard us talk about on the series know however there are renovation loans mainly two categories there's a conventional one and there's a hard money one hard money one's the one that most people use you put twenty percent down on the purchase and you get the renovation financed as long as the property appraises high enough after you do the renovations you're good that's a standard hard money or Bridge Loan some people call them it's short term you get in and out of it you do your Renovations and refinance and do a better product the one that everybody's going to be interested about is there are conventional and FHA options the FHA is called the 203k the conventional loan is called the home style renovation loan it's an offering through a Fannie Mae and Freddie Mac and that allows you same thing to get an after repair value appraisal so you get the appraised value of after the property is renovated and you can get funding based on the percentage you know loan to value of that after repair value not the current one and you can use that margin to do the renovations on the property there are a lot of restrictions there are upfront costs so it's not just rainbows butterflies you guys are interested in that loan product reach out to us we do offer it it's more difficult cold than a normal loan there's going to be a lot more involvement and cash up front that is uh required yeah there's a principle that I've learned when it comes to real estate in general I call it easy and hard out or hard end easy out it applies it several ways so for instance if you're a real estate agent the leads that come to the easiest like you buy them on Zillow are the hardest to put in a contract they're very difficult and then the loans that are the hardest to get like you go out there and you meet real people you cold call you talk to your friends and family you meet someone at open house they're way easier to put into contract because they have better expectations I see this with properties very easy to buy luxury property that's been sitting on the market for 250 days but then it's hard to sell it there's less buyers and it's very hard to get into the best deals out there but once you have them they're very easy to get out of I tend to look at loan products the same way there are certain loan products that are good for the long term something like the 203k loan or the home style loan they're great for the long term they're incredibly difficult to use to get a property then there's other loans that are much easier to use to get a property these would be Bridge loads or hard money especially when you can can borrow money from the rehab and put it in the loan but they're bad long term so you're gonna have to refinance out of them into a better loan my personal take on this is you're better off to use a load that makes it easier to get into a property for the short term then refinance out into one of these other products that are better to hold for the long term rather than using one of the products that are good for the long term like the 203k and trying to force your way into the deal with them in the beginning what do you have to say about splitting it into two stages to make it easier versus trying to use one load product for both yeah I couldn't have said it better myself the barrier to entry of 203k home style right these loans that like they're kind of like trigger words like you know I can put five percent down and get my renovation Finance what a miracle you know like yes that product technically does exist the likelihood of you qualifying or the property working or being able to Front The Upfront expenses because you got to pull permits get designs get drawings get you know sometimes zoning work done every barrier to entry that you initiate on the front end makes it harder to get to that easy on the end like David would say right whereas the other way around you do a classic Bridge load super easy on the front end and then you just refinance right you you piecemeal it like you said right and you can go get a a good 30-year fix which is how most flippers you know Renovators a lot of Burr people um there's a reason why one of the R's in burst stands for refining there's a reason why it's there right you don't get a loan up front that covers every great point right I mean there's a whole letter dedicated to it you know so typically historically speaking that's the best way to do it yeah don't leave one of the Letters Out of the Burr you mess it up right don't take don't take one of the tires off the car don't leave one of the ingredients out of the cake and don't take one of the Letters Out of Burr you will regret it that's a great Point all right Christian thanks very much man I appreciate you helping me dispel some of these mortgage myths because quite frankly like many things in real estate what you hear about is often clickbait people are going to tell you about some new cool strategy that you can get a great deal on or some approach to real estate that no one else has heard about without telling you how ridiculously hard it is to execute the same is true for mortgages people are trying to get you in their funnel doesn't have to be that way everybody thank you for your time thank you for your attention and thank you you for learning from us Christian if people want to find out more about you or reach out to learn about what you can do to help and where can they find you yeah the one broker on social medias my email is Christian at theonbrokerge.com and that's also our website the onebrokers.com find out more and then you can follow me at davidgreen24 all over social media please do we want to hear from you we want to keep you from getting ripped off by bad loans you can also follow this channel by subscribing at BiggerPockets here we have lots of content more than just the podcast that we want to educate you with because we care about your financial future lastly you can check me out on YouTube live every Friday night at youtube.com davidgreen24 Christian is frequently on there and we are dispelling more myths and talking about how you can build your well thanks everybody check out another video and go subscribe to the BiggerPockets podcast if you haven't already see you on the next one [Music] [Music] thank you

Channel: BiggerPockets

Views: 18,409

Keywords: brrrr method, brrrr, brrrr strategy, brrrr investing, buy rehab rent refinance repeat, buy rehab rent refinance repeat strategy, buy rehab rent refinance repeat method, how to brrrr, mortgage, mortgage loan, investment loan, investment property loan, what is the brrrr method, brrrr method explained, flipping houses, flip houses, mortgage rate, interest rate, invest in real estate, how to invest in real estate, biggerpockets, mortgage mondays, david greene, christian bachelder

Id: sJwIQW4rbUM

Length: 14min 6sec (846 seconds)

Published: Mon Jul 17 2023