How to BRRRR Invest with No Money Down

TL;DR

Josiah Smelser shares his strategy for BRRRR investing with minimal capital, focusing on long-distance deals in Dallas while living in Huntsville. He emphasizes solving capital bottlenecks and offers insights on appraisals to maximize returns. The episode, recorded pre-COVID, provides timeless tips for real estate investors.

Transcript

this is the bigger pockets podcast show 382 part 1 you're listening to bigger pockets radio simplifying real estate for investors large and small if you're here looking to learn about real estate investing without all the hype you're in the right place stay tuned and be sure to join the millions of others who have benefited from bigger pockets calm... Read More

Key Insights

• Josiah Smelser leverages the BRRRR strategy to invest in real estate with little money out of pocket.
• He emphasizes solving the capital bottleneck by securing private money to cover down payments.
• Josiah operates long-distance, investing in Dallas while residing in Huntsville, Alabama.
• The key to successful BRRRR investing is accurately determining the after-repair value (ARV) of properties.
• Josiah, a licensed appraiser, offers strategies to ensure appraisals reflect true property value.
• Building a strong team and systematizing processes are crucial for scaling real estate investments.
• Josiah's approach includes using both hard money and private money lenders to finance deals.
• He advises investors to identify bottlenecks in their business and find creative solutions to overcome them.

Questions & Answers

Q: How can I invest in real estate with little money down?

Josiah Smelser recommends using the BRRRR strategy, which involves buying, rehabbing, renting, refinancing, and repeating. By securing private money to cover down payments and utilizing hard money lenders for the purchase and rehab, investors can minimize their out-of-pocket expenses. Accurate determination of the property's after-repair value (ARV) is crucial to ensure successful refinancing and pulling out invested capital.

Q: What is the BRRRR strategy in real estate?

The BRRRR strategy stands for Buy, Rehab, Rent, Refinance, Repeat. It involves purchasing a distressed property, renovating it to increase its value, renting it out to generate income, refinancing to pull out the invested capital, and repeating the process with another property. This approach allows investors to build a portfolio with minimal upfront capital by recycling their initial investment.

Q: How can I accurately determine a property's after-repair value (ARV)?

Accurately determining a property's ARV involves analyzing comparable sales in the area. Josiah Smelser advises using the MLS to find recent sales of similar properties in terms of size, location, and amenities. It's important to consider factors like square footage, condition, and market trends. Presenting accurate data to appraisers can help ensure they see the property's true value.

Q: What are some tips for working with appraisers to get a favorable appraisal?

To get a favorable appraisal, present the property in its best light by ensuring it's clean, well-lit, and smells good. Provide appraisers with a list of improvements and their costs, along with comparable sales that support your desired value. Approach appraisers with respect and provide data to help them make an informed decision. Building a positive relationship can lead to better outcomes.

Q: How can I overcome bottlenecks in my real estate business?

Identifying and addressing bottlenecks is crucial for scaling a real estate business. Josiah Smelser suggests analyzing your processes to determine what's slowing you down. In his case, securing capital was a bottleneck, so he focused on obtaining private money. Building a strong team, systematizing processes, and continuously seeking creative solutions can help overcome obstacles and drive growth.

Q: What are the benefits of long-distance real estate investing?

Long-distance real estate investing allows you to capitalize on markets with better opportunities than your local area. Josiah Smelser invests in Dallas while living in Huntsville, leveraging his knowledge of the Dallas market. Benefits include diversification, access to higher-yield properties, and the ability to invest in appreciating markets. However, it requires building a reliable team and systems to manage properties remotely.

Q: How can I scale my real estate investment portfolio?

To scale a real estate investment portfolio, focus on systematizing processes, building a strong team, and securing reliable financing sources. Josiah Smelser emphasizes the importance of identifying and overcoming bottlenecks, such as capital constraints. Leveraging strategies like BRRRR, utilizing private and hard money lenders, and continuously seeking new opportunities can facilitate growth and scalability.

Q: What challenges do real estate investors face in the current market?

Real estate investors face challenges such as fluctuating property values, lender requirements, and competitive markets. The COVID-19 pandemic has introduced additional obstacles, including economic uncertainty and regulatory changes. Josiah Smelser highlights the importance of adaptability, perseverance, and creative problem-solving to navigate these challenges and continue building a successful investment portfolio.

Summary & Key Takeaways

• Josiah Smelser shares his approach to BRRRR investing, focusing on solving capital bottlenecks by using private money to finance deals. Operating long-distance, he invests in Dallas from Huntsville, Alabama, and emphasizes the importance of accurate appraisals to maximize returns. His strategy involves building a strong team and systematizing processes for scalability.

• The episode delves into the appraisal process, with Josiah offering tips to ensure appraisals reflect the true value of properties. He highlights the importance of presenting properties in their best light and providing appraisers with accurate data and comps. Josiah's experience as a licensed appraiser adds credibility to his insights.

• Josiah discusses the challenges of the current real estate market, including navigating lender requirements and property valuations. He shares his journey of building a $4 million portfolio and the importance of grit and perseverance in overcoming obstacles. The episode serves as a comprehensive guide for investors looking to scale their real estate ventures.