Welcome! Welcome!
We are at our 116th rental property. We're going to use this live case study as an example of how to use the BRRRR method or BRRRR strategy which is a way to not have to put 20% down on every single rental property. This is a way to properly leverage debt. This strategy can change your life, so stay tuned for a real life example. Lucas' gonna crush it. So we are going to run you guys a real-life case study of the BRRRR method or BRRR strategy. They mean the same thing method and strategy so we'll
use those words interchangeably. What that stands for is Buy Rehab Rent Refinance and Repeat. Did I do that right? Got it! I did it right. Alright. so this is a crazy way that you can grow
wealth using other people's money. We've done - we have probably close to $4,000,000 in equity using somebody else's money. So that's properly leveraging debt. Yeah, so we use our sweat equity. We rehab this house to create equity and that is our net worth for the most part. So this particular house we're at the B stage of the BRRRR strategy. So we just bought it. Just walked it. Needed a little more work than we initially thought but we think we're going to be able to rehab it and refinance out and recapture all of our money. Why did it need more work Lucas? Why didn't we know that it needed more work? Well this particular house, we did not see it before we purchased it. We've never done that before, have we? Just a couple of times. We did see pictures. We bought it from a wholesaler that we know and trust. So let's give you some initial numbers on this and then we'll do a quick walk through the house and show you the condition. So then the next R, which stands for Rehab, we'll talk about how we're going to rehab and what we're going to do. So we bought this house from a wholesaler for $72,000. That is key when utilizing the BRRRR strategy or BRRR method. You have to buy houses at a discount and that's usually the case because in order to buy a house a discount it's going to need work. You're going to need to fix it up and add value. Just a normal house on the market that's rent-ready or livable you can't buy that at a discount especially in today's market. So you need to find houses at a discount so you can add value so then you can in return use that value add to refinance and get all your money back. Yeah, we knew this house was at a discount because houses in this subdivision are selling for about 130 000. So we use that $130,000 as our after repair value, our ARV, and we take that and we multiply by discount percentage. Whether using 75% or 80% or somewhere in between and then subtract our rehab cost which is about 26-30 on this property and that's why we're able to buy it for $72,000. Yeah, so just to use just simple numbers on Lucas' example is we take ARV
(which stands for After Repair Value) What the house is worth, fixed up. Multiply it by a discount percentage somewhere between 70%-80% which gives you your profit and or you know value equity at the end minus the repairs. So in this example, it's $130,000 (which we think this house is worth fixed up) x 0.75 - $25,000 to $30,000 and that's where our purchase price is going to be around where we bought it. Yeah and going the other way so we bought it for $72,000,
gonna put in $25,000 and it's gonna be worth $130,000 at the end. And that's $72,000 + $25,000, what does that equal? $97,000? So $130,000 minus $97,000 that's our equity. So we gained about $33,000 worth of equity on this particular house with $0 of our own money. So with the BRRRR strategy, we bought the house at a discount and the first R stands for Rehab. So we got to rehab this house. Oh my goodness, there you were! Let's go! So we got to rehab this house and a big part of our rehab is fixing up kitchens and baths. But this particular kitchen has this goofy little wall but I think it's solid brick it's the bad news. This is definitely solid brick. So it's got to come down. Yeah, I really think if we took this down and opened it up to the living area, it'd be a great spot for us. So do you think we should take that down Sam? Yeah, I think so. I think this kitchen it's gonna basically be a brand new kitchen. Adding a new kitchen is a great way to get a good tenant to get a good appraisal because as we talk, we'll talk about later in this video. You need to get a good appraisal in order to get your money back. So we're going to rehab this kitchen, replace the whole thing. As you can see as you're walking through the bathrooms, pretty much both the bathroom is going to be a complete gut. This hallway bathroom in here is going to need pretty much everything new. It's going to have to tear down everything around the tub. New vanity, new toilets, going to be a pretty much new bathroom. And then the small half bath of the master is going to be just a quick turn just spruce everything up. So a lot of times we like to keep our kitchen cabinets if they're good enough shape. But this house they just don't close right and they're a little
dirty and it's just not worth it. This kitchen is probably only $3,000 worth of cabinets. Maybe $2,000 and we can install them in a half a day and just it'll be worth it, in the long run, to get a brand new kitchen in here and not have to worry about it for a long long time. Yeah, for sure and as you can see the floors they're good nice wood floors. They're in great shape they just need to be redone. So we're gonna be able to we're gonna redo the floors. We're going to have a nice new sanded and finished floor. What color do we like to use on our floors, Lucas? So for our rental houses, we don't put a color on it. We do natural color so we don't have any stain. And that's so we can touch up the sanding of the floors as we turn the houses between tenants and we don't have to worry about finding stain to match. We just sand it back down and polyurethane to make a nice protective coat so the tenants can't destroy it. So we bought this house three days ago and the day
we bought it it was full packed full of junk. So the first thing we have to do is clean out the house to figure out what we actually need to do as far as rehab goes. So we cleaned it out but for some reason, our clean out guys left this 1997 boom box. I remember playing this boombox in my room when I was in like third grade. See my rhythm? So it's good. It's great rhythm. Okay. So anybody who wants a free boombox, please pick it up at 21 Queen Ann Drive. Perfect! Alright, check out up here. As you can see at some point the roof was leaking. There's a couple spots in the house that look like this. Luckily, the roof has been replaced. So we're gonna take you guys outside, that's why I got
my sunglasses on, preparing - being proactive. We're gonna go outside - Let the eyes adjust. Let the eyes adjust. So we're gonna go outside, we're gonna show you the exterior of the house. Next time you see video inside this house, this whole thing is going to be completely finished and redone ready for a tenant. Let's go outside! Hopefully, we do a good job. So we're outside in front of our latest rental. As you can see it's all brick - low maintenance. I love all brick houses. The tuckpointing in this is a little suspect. So we might work on the tuckpointing just a little bit. But overall we're not gonna have to touch this exterior for a long long long long time. Also in the front yard, what do you not see Sam? I do not see any big trees. And that's another way to keep your properties low maintenance. If you've got big trees in the front yard all those roots are going
to get into your sewer lateral going to push your foundation in. So we like to buy houses with not many big trees in the yard. The key to making the BRRRR strategy and BRRRR method work for you guys is rehabbing the property properly and not having any big maintenance items. Taking care of your big maintenance items in the rehab so you don't have monthly expenses every month to take out of the maintenance. For sure. We like to have our landscaping as simple as possible. So honestly all these bushes we're probably going to take down. Otherwise every spring or every fall we're going to have to come and trim these up because a lot of times your tenant's not going to take care of that for you. Ready? And we're back! Sam, there's no wall there anymore. Oh crap! They can see me this time, sorry. Alright, guys. Welcome back to our rental property that we have just finished rehabbing. It's rented. We know all the numbers. So we're going to go over the rest of the BRRRR method of the BRRRR strategy with you. But first, let's kind of talk about our rehab. The R - the Rehab of the BRRRR strategy. So what do we do in the kitchen here Lucas? Yeah, first of all, I think this house turned out great. The kitchen looks awesome. So we went with these brand new slate gray cabinets. We've been doing the gray cabinets a lot recently. Granite countertops - a lot of people don't like to put granite and rentals but we just like to make our rentals a little nicer. So we went to granite and this rental is about $1,300/month. So in our market, in this area, that's pretty much on the high end. So we want to make sure we have nice figures. So granite countertops, newer black appliances, new sink, new faucet, stainless steel on this stainless steel washer and dryer. And this is pretty cool, it's our new marketing material. Have you seen it? Yeah, so we put marketing material in all our rentals so people know we're a professional legitimate company. They have a flyer they can take with them with things on the property. So we want this to be professional. We want people to know we're a professional company. We're going to treat them with respect. We're going to treat them fairly and we're giving them a nice place to live, as you can see this is a nice kitchen. Yeah, and the marketing material has really helped kind of us avoid scammers recently. Because there's companies out there that'll send people through and those tenants don't know they're being scammed until they see the marketing material at the house. So that's the company that's marketing it. We're marketing and not the scammer. Alright so let's get caught up to where we are at this moment. We've already talked about the buy how we bought this and we already talked about the rehab not the rehab's done. We got the property rented, so we're going to talk
about that. We're going to talk about the refinance, what we did there, and then we're going to talk about the repeat. So we're going to finalize the BRRRR process or BRRRR strategy. So Lucas talk a little about this thing getting rented because we have it rented now. Yeah so we marketed it I think last Friday and today's Wednesday. So we had 20 applicants over the weekend for this house and the feedback was amazing. So we got about probably three approved applicants
that we love and we got to choose one here. So we're gonna get it rented about $1,300 a month and that's before they reimburse us for sewer and pet rent. So $1,300 bucks a month is what we're getting for this house. Yeah and that should cash flow us over 200 dollars a door which is what we shoot for every property we have. And then something to note there: When you do have three approved applicants, you need to do things the right way. You need to accept them in the order that they came in that they're finalized So there's a bunch of different rules that go into the fair federal housing act that we're not going to get into right now. But you do need to understand at the very simplest form, you need to treat all tenants the same and treat all tenants fairly. Whether they're current tenants or future tenants. So we got the property appraised which I answered the question all the time is when can you refinance get the property appraise and refinance. For most of you, if it's your first time doing a BRRRR strategy or BRRRR method deal, it's gonna they're gonna banks gonna want probably 1-4 months of seasoning period with the tenant in place. But you can work relation on relationships with banks like we have. And we refinance and get our money back out of that short-term loans even before tenant moves in which is the case. Now Lucas go over our refinance numbers. Yeah, so we bought this house for $72,000. We put about $30,000 into the rehab, so we're into this property for a $102,000. We got it appraised for $133,000 last week. So we're going to take a loan 80% of that and be able to recapture all of our purchase and rehab costs on this product. Plus interest for the private money lender. Exactly. Yeah, so that that's how the BRRRR method should work. It doesn't work like that every time. But in general, we use somebody else's money to buy the property. We use somebody else's money to fix it up. We got it rented and then we took the local bank and refinance it and got 80% of the appraised value recaptured all of our money plus some extra to pay back the private lender short-term loan. Yeah, so we'll have a note on this property for about a $105,000-$106,000 And with that $1,300 a month rent coming in every month we should cash flow about $200 a month. And that's kind of our goal. This is a prototypical kind of perfect example of how we like to do our rentals. This is a little higher end as far as the amount of rehab we put into it. We usually like to be between 20 and 30, but we were right at 30 so we weren't too far off. Yeah. Alright, so now that we got the property refinanced we get to the - Sam finally gets to jump over a wall. We knocked down the kitchen wall but, come on. I made it! I hurt my stomach. Good work! So now we get to the fun part. We got all our money back. We got a private lender's money back. So we get to go do this again. We get to find another property, fix it up, get it rented and refinanced again. It's a beautiful thing. This is the scalability that I love with the BRRRR method the BRRRR strategy. I talk about this all the time in some other platforms but we do pretty well for ourselves but we don't make enough money to put 20% down on 3-5 rentals a month. Like we're doing right now. That'd be $200,000-$300,000 you'd have to put down on each property if you're gonna do 20% on each property so, yeah. Alright, so that's $200,000-$300,000 you'd have to have
totaled to put 20% down on 3-5 rentals in our area. And we don't make an extra $200,000-$300,000 a month to build rentals. So that's why the BRRRR strategy the BRRRR method is so powerful. I'm a little out of breath from jumping over that wall. But that's why it's so powerful because you can scale so quickly and small local banks understand the BRRRR method. They understand the BRRRR strategy. So your debt income ratio and all that stuff doesn't come into effect as much because it's an income producing property. It's not your residential mortgage where you're just paying every month. It's not giving you any money. Yeah, we'd like to create our equity not by cash but by finding
properties at a discount and then creating equity by rehabbing the property. That's where our equity comes from. So last time you guys were here, did you notice that the ceiling's put back together? I didn't think we were - I thought that was off the scope work I thought we're gonna leave them. Well since we came in a little under budget, we decided to do it. Perfect. Great. If you guys like videos like this, please comment
below and tell us and tell us about a recent BRRRR deal that you guys did. We're closing on two new rentals this week so we're gonna create a lot of other videos just like this one. And if this is the first time you've seen or heard about the BRRRR method, check out this video above. Lucas and I sit in the corner of our office in our video room, we talked for about 85 minutes about how to buy your first rental property without using any of your own money. It's a super super detailed video, but with a bunch of information. So if you have any interest in growing your own portfolio using the BRRRR method without using any of your own money make sure to check out this video. And also subscribe to our channel. We go live on here so you're going to want to make sure to hit that notification bell so you get notified when we can go live. We can interact one-on-one and answer your questions. So make sure you subscribe, like, comment, follow.
