Here’s the backstory: We’re nearing the end of our renovation on a fourplex we purchased in 2018 for $149,000. Over the years, we’ve invested around $110,000 into it—new roof, ACs, appliances, railings, and fresh paint. Since it’s a 1905 build, bringing it up to code was a priority.
As the renovations wrap up, I started considering recouping our costs using the BRRRR method—Buy, Rehab, Rent, Refinance, Repeat. We have a 30-year fixed mortgage at 4.85%, which was the DSCR rate back in 2018. That was my first experience with DSCR lenders, and honestly, I’m not sure I’ll ever go back to traditional mortgages.
I reached out to a realtor who had recently asked if I had anything to sell. Kudos to JC for planting the seed. He provided a broker’s opinion of value at $360,000, which was confirmed by the appraisal. Initially, I wasn’t thrilled, but JC pointed out the numbers: “Bought for $150,000, put in $100,000, now worth $360,000. You could walk away with $100,000 in profit.”
But I said no, and here’s why:
First, like many investors, I believe my property is worth more. I told him if he could bring an offer of $450,000, then he’d have my interest.
Second, I explored refinancing using the BRRRR method. The appraisal came in at $344,000, and my DSCR lender offered an 80% loan-to-value, around $275,000. After paying off the original loan and closing costs, I cashed out approximately $90,000.
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Here’s the kicker: Thanks to the renovations, we increased rents, resulting in $500/month in cash flow after all expenses (TRIMMVC: Taxes, Repairs, Insurance, Mortgage, Management, Vacancy, Capex). With major Capex items like the roof, HVAC, and appliances replaced, we’re in good shape for the next 5-10 years, and rents will likely continue to rise.
Even after jumping from a 4.85% to an 8.5% interest rate, we’re still seeing $500/month in cash flow. Once rates drop, we’ll refinance again. For now, my motto is cash plus cash flow.
So, given this scenario, what would you do?
Sell the property or use the BRRRR method to maximize your investment?
Common FAQs using the BRRRR Investing Strategy:
I use and highly recommend DealCheck.io.
With none of your own money, yes. Partnerships are the best way to grow your portfolio without using your own money. Utilizing creative strategies like Hard Money (via W2 Cap Capital LLC) will allow you to fund the purchase and rehab with only 10% down (sometimes 0% down given the opportunity).
Off market. If you don’t know how to pull an off-market list or the mailers you’re sending aren’t producing the results you want, watch the free video at https://FindYourNextBRRRR.com to see exactly how I’m finding our most profitable properties.