How To Buy Your First Rental Property (BRRRR Strategy)

what's up you guys this is stats in today's video i'm going to show you how to buy your first rental property using the burst strategy the burst strategy is one of my favorite way to buy long-term rental property and let me tell you why one i can buy the property and i can add value and force value and get sweat equity instantly the moment i'm done rehabbing the property number two my mortgage is usually lower and i usually get better cash flow because the mortgage is lower and of course when owning these property you got i get right off i get cash flow and i get to have appreciation this is strategy when you learn how to master this it is the bomb baby let me explain all right you guys i'm going to show you guys how to buy your first rental property using the burst strategy and the requirement is going to take to actually do the burst strategy okay one i'm gonna share with you what the burst strategy actually means two the requirement on what actually take to do it right and successfully and then three what type of people you need to have in your team to do this right and then lastly i'm gonna share with you a real life example of a rental property i use a burst strategy on so let's get started baby so here's the requirement what you're gonna need to do the burst strategy now i'm gonna go a lot more in depth okay a little bit further down this video on this whole requirement but for now here's what you're gonna need number one you're gonna need good credit so later on when you refi into permanent financing you're gonna need good credit and you need at least 620 or higher the higher your credit score is the better your interest rate's gonna be just remember that okay now the other thing you're gonna need is you're gonna need at least two years of work history at the same place you can be self-employed with the same place or you can work for someone but it has to be at least two years on your tax return that show you've been actually working at the same place for at least two years okay the third thing you're gonna need is when you do your rehab your purchase price and your rehab what i call all in number you are in number has to be at least 65 to 70 of the arv set for after repair value so i'm going to use an easy example if your arv is a million dollar you're going to need to be all in at 650 or 700 000 because you need at least 25 to 30 percent equity in the deal in order to diverse strategy and get your original dolphin back in your pocket and all this is gonna make a lot more sense once i go through the burst strategy with you guys later on this video so now you gotta put a team together in order for you to do the birth strategy the first person on your team is you gotta be the person who actually had to go find the deal either you're gonna have to find the deal like for me i actually go out there and i look for deal myself if you got time you can find yourself by you driving around you see ugly houses how they need a lot of work you can actually write letters to those people you can do unlock the people you can call them ask them do you want to sell if you don't have time to do all that you can find a whole seller someone who actually go do those and then they will tie it up and they'll sell it to you they make a little bit of profit on that so you're not gonna get the best best deal if you do it yourself versus you hiring you know not you don't hire a wholesaler the whole seller's gonna do it themselves but then they they look for investor they can sell the deal too now you can find wholesaler by if you go on social media you say hey i'm looking to buy a deal anyone out there is a wholesaler send me these deals in this era i'm looking for tell them what you want or there's a lot of online investment club or social media club where you can actually go and tell them hey i'm an investor i'm looking for this type of deal this type of condition and then you got a wholesaler out there send me deals or you can actually have a realtor find you fixer-upper on the mls sometimes you will find deal on mls the challenge is when there are fictional mls there's a lot of investors looking for deals on there and so what happened is that they get multiple offer and they get albeit and then those deals it don't become deal no more but there's time when you do find them out there okay other thing you can do is more advanced i've seen a lot of investor hire what they call virtual assistant and they actually these virtual assistants go out there and they find a deal by calling and marketing two people and then they basically bring it back to you like for example we have va's that go find a deal for us also so these are just some ways how to find deals the second person you need on your team is a general contractor in order to find a good general contractor you gotta talk to other investors who hopefully somebody you know that have worked with general contractor a few projects and they've been reliable and they're reasonable in price then you get referral from your friend or investor friend i've done it those are the best referrals another way to do it is actually again you go to the real estate facebook clubs or sometimes they'll do it live you can talk to people there and ask them who they use for contractor right or sometime contractor are in these clubs on social media or live and you can meet them but if you haven't seen their work you might want to check reference to see how well they did how reliable they are or you got to go out there and check and look at their project and see how they're done the third thing you can do is you can find them on angie's list and read the reviews on them if they get a lot of reviews and those are the people you want to hire a general contractor the third person on your team is a hard money lender harmony and lender are basically private lenders that will lend money to rehab houses they don't really care about your credit as long as you have typically 10 to 20 down based on your experience and you have some experience of rehabbing houses or at least your contractor have experience we have how they'll lend you the money how you find a harmony lender is very similar how you find a general contract and the fourth person you want on your team is a traditional lender traditional lender are the typical lender that's going to basically lend you the money so you can do a 30-year fix because harmony and lender they do short-term lending once you refine your house out of harmony lending you need to put in traditional lending like the 30-year loan you need the traditional lender these lenders they want at least 620 credit score and higher than one two year of working history at the same job if you want most or all of your original down payment back in your pocket when you refinance your permanent financing you're gonna need to make sure you're all in number is 65 to 70 percent all in of your arv arv is after repair value you run at least 65 to 70 all in or 25 to 30 margin in these deal and that's how you're gonna be able to get a lot of your original down payment or all of it back in your pocket when you re-fight your permanent financing now that you know what you need and who you need on your team so let's go over the burst strategy and what it is and how to do it the right way so let's hear what the burst strategy actually mean so b stand for buy it now the key with doing the burst strategy correctly is you want to buy it in the condition i need a lot of work a lot of people buy the property that don't need a lot of work the key is you want to buy the property in a really bad condition the worse the condition the better the burst strategy is going to work okay r stand for renovated the second r stand for rent it out then the next r stand for refinance it and then the last r stand for repeat the process and i'm going to explain this whole process on a real deal i bought recently using the burst strategy let me explain the burst strategy in detail because when i watch people that watch my video they explain burr totally different and then sometimes they buy property and they go that i just did a burr and i say to myself they didn't burr you just bought a rental property and you just actually rented it you didn't even rehab the property so let me explain to you in detail how it works so the bees stand for again buy it and the key here is you gotta buy the property in a fixer condition form you can buy a property in what i call a good condition move in ready to go or you can buy a fixer to me when you buy a property already clean move in then you just buy it and you don't do nothing to it you rent it out you can do that all that is you're just buying what i call a rental property but when you hear somebody use the word burr the biggest reason why they use it with burr is this they buy the property as a fixer and then they rehab the property and after they rehab the property they make our property worth as much as a property that's already cleaned that way we have instant equity so the key when you hear people say the burst strategy you know they actually bought as a fixer and they rehabbed it and they got instant sweat equity in the deal make sense the first r is renovation when you buy the property especially the burst strategy you gotta renovate that's the difference some people buy properties already in good condition they don't have to renovate they buy it and turn it into rental right away the only difference is they don't have sweat equity why i like to do the burst strategy is i don't mind going in rehabbing it and then actually build sweat equity through the house redone the house is worth more than i actually bought it for key with doing the burst strategy is you gotta learn how to add value and force value what does that mean add value is you rehab what's already existing so let's say it's a three bedroom two bath one level house and it's super dated or near it's a major fixer adam bay you just three bedroom two bath what's already there forcing value is you actually finish out something for example forcing by you is buying a house a three bedroom two bath and there's an unfinished basement what you do is you finish up the basement so you get more square footage more better bathroom now you're gonna make the house worth a lot more money especially if the upstair is a fixer so i like to buy a property where i like to add value we have upstairs for example and then force vibe which is adding a little better back downstairs make it look new it's about the end of the day all right i have a whole new house that'll be my upstairs and adam will bend down downstairs that means that thing is worth a lot more money when i'm done with it and that's how you can actually do the burst strategy and you can get 20 25 30 margin you can't get no margin if you buy the property already in good condition that's the between a burst strategy property versus buying something already done and clean rental property second r stand for rent all right the second r stand for rent after you renovate the property they look all nice then you got to go out there and find a renter for it now for me i actually have a property manager to actually manage it for me now before i had 15 property my wife and i we actually manage it ourself so we actually went out there and learned how to do at the beginning i think it's good that anyone who actually owned rental they should at least try to rent it themselves for the first one or two property maybe three that way you understand how to actually you know run ads how to screen your tenants how to manage the property how to pay the bills you need to know that the ins and out of being a property manager and that way by the time you turn it over to the property manager they can't really sell you on something they do or don't do because you know oh that don't work oh that worked so for us when we had 15 rental property we knew certain things we did as effective and then certain time we handled the property manager they were trying to tell me they're going to do this and this this i actually said to them why that's just a waste of time and money why should i pay spent money on that and they couldn't argue with that i ran it we managed the first 15 property ourself okay now today i have a property manager they manage it for us where they rent the and where they run the ad we run ads in craigslist craigslist is actually a great place to run ads literally most people own uh rental property even apart building they rent it on craigslist the other place we put it on mls and we also put on trulia okay and of course my social media page so craigslist probably does the most the rest of the stuff is bonus we rent it out that way that's how we find a tenant now for me my property manager they screen everybody what they do is they try to get at least 18 month lease we used to do 12 months but we realized it's actually better to do 18 months because if you ran it let's say in january it comes around january and hopefully you don't rent it on the bad time you read in december coming around december and you're going to go vacant then you're vacant in december which is the worst time to rent your property out so it's always better to do 18 months you can get it we charge first last and deposit the biggest thing i'm gonna tell you right now and i told this to somebody the other day if you're gonna rent the house out you don't do nobody a favor if they can't come over first last in deposit and they get really really bad history of being a renter as much as they give you the sad story if you don't want to have bad experience being a landlord just don't rent to them because the moment you do my favorite and the don't turn out well you guys you guys gonna get very disappointed mad at them imagine yourself actually doing it i got a problematic to do all that but if you're gonna manage yourself do the same thing and that's where i have a property manager i let them deal with it and then that's where we rent and find tenant the next r is refinance for a lot of you don't know when you do the burst strategy a lot of traditional lender will not finance this home because they have way too much work order the only person that can lend on these homes are harming lending and harmony lending what they require when you buy a fixer-upper is that if they're gonna land on it they want you to put at least 20 down unless you get a lot of experience like me okay what they will do is this let's say you buy a property four hundred thousand and it costs fifty thousand dollar rehab that's 450 they want you to put 20 down which is 90 000 and then they will lend you the rest of the money to closing the deal and to rehab the property after you basically finish renovating and finding a renter then when you get done then you want to refinance out of this short term high interest rate hardware lender lending into permanent financing you want the 30-year fix you want to refi get the 30-year parking and write it out in order for you to do that you got to go talk to a regular lender and then they would refinance you out of hard money and put you into a 30-year fix in a moment i'm gonna show you a real deal where i bought a property using the burst strategy am i doing it right you guys i got my original down payment with that ninety thousand i'm talking about in this example back in my pocket so i have no money vested in this deal and the last r is repeat the process the last r is repeat the process everything i explained to you and you do it right you get the original down payment you take that money and you go do this whole thing all over again and if you do this right and you can get a house done within six months for example you can do two bur in one year with the exact same down payment let me show you a real live example let me break down the number when i pay for this property how i finance this deal i paid 365 for this deal causing the 85 to rehab this house when i bought this deal three bedroom two bath upstairs and downstairs was a unfinished basement in order to actually get the most arv you gotta find property where you can add value in force value since there was nothing in the basement we added a one bedroom a full bath and a kitchenette downstairs so this house became a four bedroom three bath house with a second kitchen downstairs for the mother-in-law and that's why right they caught 85 000 to rehab i'm all in for 450 and this is why this bank they appraised for 7.25 so after i rehab this property i wanted to basically refi out of the harmony lending and basically get permanent financing 30 years fixed so harvard lender wanted 20 down which is 90 grand okay and then they'll lend you the rest of the money to close in the deal and rehab the deal so out of pocket is only 90 grand to do this deal edition lender says 70 i'll give you 70 ltv of 725 which is 507 and some change i didn't need all that money i just told the bank just give me 450. if i get 450 if i get a new low for 450 i can get back my 20 percent which is 90 grand and harvard land will get back there 80 grand like 80 i mean and then everybody's home i'll be i'll be i'll get all my original down payment so i got a new loan for 450 dollar which is down here i'm going to show you her my new lowest 450. the bank appraised for 7.25 i'm all in for 450 that mean my equity in this deal was 275 000 instant equity that's 38 margin deal that's a big margin just to give you an idea most flipper they do between 10 and 15 margin most people do burr they might get 15 margin when you have a 30 plus percent margin that is rare now it's not rare for me because i know when i do a bird i gotta add value and force value when i bought this property i said it was a three bedroom two bath when i finished the basement up it became a four bedroom three bath hour with a second kitchen you guys see that that's how you get this kind of margin so my new loan i only took a level 450 i just wanted to be whole okay even though they gave me more money i didn't want more money my loan is 450 my mortgage with principal tax insurance property manager is about 2800 bucks at all including i rent the top half of the house out for 24.25 i rent the mother-in-law downstairs for 14.25 so my rent is 38.50 my mortgage is 2800 that mean i get a thousand fifty dollars a month in positive cash flow which is twelve thousand dollars a year so at the end of the day since the bank was willing to finance up to seventy percent of the number five hundred seven thousand i didn't need all that money i want 450 to be whole so i got a little for 450 that mean i got my 20 back and hard money got there 80 back so when i get my 90 000 buck you guys i mean i have no money invested in this deal i didn't take any of my equity out so i mean i still got my 275 with the equity and i get 12 000 a year in positive cash flow this is a full burn so when anybody talking about burr you guys if you don't get over 30 you're not going to be basically have no money invested so this deal with no money vested 275 000 in equity you repeat the process you take the 90 grand you do it again if it takes you six months to rehab let's say four to six months i mean in one year you can do two deal with the same 90 000 that right there is how you grow your portfolio okay using the birth strategy also so you guys this right here is how you do the bird successfully okay that's a wrap for this bird video do me a favor like comment and subscribe to the channel and i will see you guys next video peace out

Channel: Thach Nguyen

Views: 104,179

Keywords: brrrr, brrrr strategy, brrrr method, how to brrrr real estate, how to buy first rental property, how to buy first rental property with no money, how to buy first rental, real estate investing, thach nguyen

Id: WQozzGqOLOs

Length: 17min 26sec (1046 seconds)

Published: Mon Jul 25 2022