BiggerPockets Real Estate Podcast - 513: Seeing Greene: BRRRR 101 - Loans, Deals, & Cash Flow

Episode Date: October 3, 2021

Welcome back to another episode of Seeing Greene with BiggerPockets Podcast host, top real estate agent, and BRRRR master himself, David Greene. Today’s episode touches on many topics that relate to the BRRRR strategy, ranging from financing, rehabbing, calculating cash flow, and where to find deals. Since the BRRRR method is such a popular strategy among real estate investors, we thought it best to have an episode that touches on so many aspects of the BRRRR strategy itself. Not only has David written the book on BRRRR investing, but he also continues to do BRRRR investing in his real estate career. This strategy is not only one of the best ways to get into real estate with low (or no) money down, it’s also a method that works on building generational wealth for you in the background. Have a question you want David to answer on the next Seeing Greene episode? Submit your video submission at Biggerpockets.com/david. In This Episode We Cover: Whether you should refinance a BRRRR in your personal name or an LLC Using agents or wholesalers to find your next BRRRR property Why some markets simply won’t cash flow (and why that isn’t necessarily a bad thing) The minimum cash flow requirements for a multifamily property Hard money loans vs construction loans when performing a BRRRR How to get financing when your property is not a traditional rental or commercial building And So Much More! Links from the Show BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Youtube Channel BiggerPockets Rental Property Calculator BiggerPockets Podcast 501: Seeing Greene: How Soon Can I Refi? + 11 Other Real Estate Questions BiggerPockets Podcast 487: 10 Common Real Estate Investing Questions Answered by David Greene BiggerPockets Podcast 473: Quitting the Police Force, Wholesaling, & Buying Notes with David Greene\ Submit Your Questions to David Greene Click here to check the full show notes: https://www.biggerpockets.com/show513 Learn more about your ad choices. Visit megaphone.fm/adchoices

Don't do something that could ruin your entire career on your first deal, where you lose all your capital and you ruin your wealth building future. Just like don't step into a cage on your first day of a martial arts class and ruin your entire career by having traumatic brain injury because you don't know how to protect yourself. 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 other. who have benefited from biggerpockets.com. Your home for real estate investing online. All right, everybody, I am David Green,

co-host of the Bigger Pockets podcast, and today we are doing another Seeing Green edition where yours truly will answer your questions regarding real estate, wealth building, or anything that Bigger Pockets covers. Now look, if you would like your question to be answered, which I certainly hope you do, please go to BiggerPockets.com slash David.

It's very simple. All you have to do is upload a video of yourself, asking a question and we will do our best to answer it. If you don't want to do that, please just consider joining a Bigger Pockets Facebook group or maybe the Bigger Pockets forums where you can ask questions there and many times we pull from there and I answer them for all of you here. Now here's the deal. What we're really looking for on a podcast like this is a way for people that are listening to the main podcast or just really coming across real estate questions in general that wish that Brandon or I would have dug deeper into a certain question. So let's say that you're

listening to the show and you hear the guest mentioned something about tiny houses or financing strategy and you think, oh, I wish they would have dug a little bit deeper, but the conversation kept going. This is your chance to make sure we dig deeper. So go to biggerpockets.com slash David and ask every single question that you think you can come up with while you are listening to our podcast or as you're just living your life. I promise you, other people are thinking the same things and we want a chance to answer that on air for all of you to hear. All right, before getting into today's show, I did want to mention that I asked for feedback. and the response has been overwhelmingly awesome.

You all have done a great job of giving feedback both on YouTube and on the website about what you like and don't like about what's going on. Please continue to do that. We are listening and we're trying to tailor our approach to give you what you'd really like. I want to take a second to highlight some of the responses that we've gotten from the comment section just to show some appreciation for what's going on and then maybe bring some humor to the podcast because you guys are leaving some really good comment.

First comment is from Sally F. She says this is a really, really, really great format. David is the real estate equivalent of Dave Ramsey when it comes to clear, concise, common sense answers. Well, thank you, Sally. I really appreciate that, especially since the number one form of criticism I do get is that I am too long-winded. So hearing someone say that I'm clear and concise does really help. And it's never bad to be compared to Dave Ramsey. He is full of wisdom. He gives some controversial advice when it comes to real estate just because he tends to be against any form of debt and that's not where I am. But overall,

I think Dave does a lot of good and I appreciate that you seem to see me in that same light. Corey says, thank you, David, for doing this Seeing Green series. Your responses to Helox first cash out refies is Golden. Well, I'm glad to hear that from Golden to Greenin. I'm here for you. Mel, this is one of my personal favorites. I like David's straightforward style. All Hennessy, no chaser.

Awesome. Thank you very much for your feedback and I am glad you guys are enjoying this show. We hope to continue making more of them in the future. Managing properties can feel like a full-on circus. You're juggling vendors, tracking payments, chasing approvals across multiple properties, and maybe a few HOAs, all while trying to keep tenants happy and owners confident. One delay can throw everything off, and suddenly your day is all clean up, no progress. That's why hundreds of property managers rely on bill to streamline their finances.

Bill for property management lets you add all your properties, assign permissions, pay bills, and receive payments quickly and efficiently without the usual bottlenecks. It syncs with platforms like QuickBooks, Zero, NetSuite, and Sage intact, so your accounting stays aligned. You can automate bulk payments across properties and HOAs. Choose flexible payment methods like Same Day ACH,

international wires, card or check, and set custom roles in approval policies. There's even a dedicated bill inbox for each property to keep everything organized. Ready to simplify your workflow? book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress?

Here's a better question. What if you could buy brand new construction homes, 10% below market value, in the best markets across the country, without making real estate your second job? That's exactly what rent to retirement does. They're a full service, turn to key investment company handling everything for you. In some cases, investors get 50 to 75% of our down payment back at closing, plus interest rates as low as 3.75%. They've partnered with BiggerPockets for over a decade, helping thousands invest smarter. If you want to do the same, visit BiggerPockets.com slash retirement to learn more. For decades, real estate has been a cornerstone of the world's largest portfolios, but it's also historically been sort of complex, time-consuming, and expensive. But

But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise Flagship Fund. Now, you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10.10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave.

The flagship fund is one of the largest of its kind. It's well diversified and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship fund before investing. This and other information can be found in the fund's prospectus at

fundrise.com slash flagship. This is a paid advertisement. All right. So a lot of the questions that are coming my way have been on the burr strategy. Now, that's not all that surprising since I wrote this book right here, the burr book. So it's normal that people ask those questions. We're going to start off with some burr-related questions today. Hey, David. My name is Jamie Yoder, and I am a fairly novice investor from Lancaster, Pennsylvania. I have two properties. And I recently attempted to do my first burr. And it didn't go quite as I had originally planned, but I learned a lot. And my question that came up for me, was, you know, I had based all of my assumptions on what I'd be able to pull out in the cash out refinance process based off the ARV. But I had set up an LLC and I was doing the burr under

my LLC. And so when I went to do the loan, obviously it was on the commercial side. And what I learned was that the way that they looked at things was entirely different than what I was expecting. The bank that I worked with basically looked at the more of the stream of income, not necessarily the ARV in terms of how much they were willing to lend to me, which surprised me. And I've never really heard anybody talk about the differences in trying to burr within an LLC versus your personal name. And so I was wondering if that is something that is typical or if maybe that was more an anomaly with this individual bank. Because everything that I've ever done has been, you know, based off of going what the ARVU is off of. So thanks for any help or insight that you can provide on how to do a burr and estimate the lending when doing it under an LLC. Thanks, David.

All right. Thank you for that, Jamie. this is an amazing question and I'm really glad you asked it. This comes up in one way or another with just about everybody who burrs. And so our listeners are going to get a lot out of this. Guys, get your pen and paper ready or sharpen your mind, however you're going to remember things because there's a lot of information that's really going to help your investing career.

If you can understand Jamie's conundrum. So here's the thing. Jamie bought a property using the and planned to use the burr method, which basically meant he was going to buy a property, fix it up, make it worth more and then refinance to get his money back out of it. Now, the problem that Jamie ran into is that when he went to refinance it, the bank that he went to is telling me he has to use commercial financing, not residential. And that's because he bought the property in the name of an LLC, not in his personal name. Now let's break down for a minute, this dichotomy of two

different ways that you can own real estate. Just for whatever reason I notice, real estate tends to work in twos. When you're calculating ROI, there's two numbers that go into it, how much money you made versus how much money you put in. There's always just seems like there's two components to everything. If you're evaluating something based on commercial standards, you've got your N-O-Y and then you've got your cap rate. Those are the two things that fit into it. When you buy a property in an LLC, Most lenders will look at it as a business owns that property, not a person owns that property. When you buy a property in your own name, it is looked at like a person owns the property, not a business. Now, most people like to buy properties in the name of an LLC because they believe it gives them more protection.

That's typically why people end up doing this. But here's the hurdle that you run into when you go that way. It's exactly what Jamie's coming across. Lenders tend to look at property own the name of an LLC as a commercial. commercial property and commercial properties are evaluated differently than residential. So let's break that down right now. How is a commercial property valued? What you need to understand is commercial properties and commercial loans operate on business principles. So if you were to buy a business from somebody else, what you would want to know is how much money does it make in a year? And if I was

going to give you a loan to go buy that business from someone else, my question would be, how much money does that business make in a year? Because you're going to pay me back based on what the business paid you. That's the first distinction that everybody needs to understand. If you're buying a commercial property, it's viewed as a business. And what the lender cares about when lending to a business is how much revenue does that business bring in and how much profit is left over. So I know if you can pay me back. That's rule number one. When you're buying a helm in your own name, a residential property, it's not intended to generate revenue. Now, as investors, we use it for that purpose. and this is what confuses us sometimes is we look at real estate always like it's a business.

But lenders aren't. If you're buying a home as a residential property in your own name, what they want to know is, can you pay me back? Not can that business pay me back. That's why when you're buying a house in your own name, lenders want to know what's your W-2 income. How long have you had that job? What is your credit score?

These are all things that help them understand if you as a person will repay them. When you're buying commercial property, they don't really care what you as a person can do. They care what that business can do. This is why if you have low credit or some of these other issues, commercial investing is easier for you. Because it doesn't matter what your ability to repay is. The bank wants to know what the property's ability to repay is. So I hope you guys are just understanding that concept first. Residential homes, the bank cares about what you can pay. Commercial properties they care about what the property can pay. The next piece of that would be if you buy something in your own name, it's looked at like a residential property. If you buy it in the name of an LLC, which is a business, it is now looked at like a business.

and they care about what the property can repay. And that's where Jamie's running into trouble. So what Jamie mentioned was the bank is saying the income coming from the property determines what that property is worth in our opinion, which is how commercial property is valued. If you buy an apartment complex, they're not so interested in what the apartment complex down the street sold for. What they want to know is how much revenue does this apartment complex bring in?

And I keep saying revenue, but what I really mean is profit. It's called the net operating income or NOI. You're basically taking all of your income, subtracting your expenses, and what you have left over is your NOI. That's how commercial properties are valued. For Jamie's case, that's what the bank is doing here. And he's saying, well, the rent is this much, the expenses are this much. Based on what it brings in, the bank's telling me it's only worth this much.

But my calculations, when I was running it before I did my burr method, were based on the after a pair value, the ARV, and I had it as this much. That's because when it's a residential property, we don't care what kind of income it generates because residential properties are not bought as a business. They're bought to live in. And what do people care about who are buying a house to live in? What do the neighbors down the street pay? That's where the comparable sales system comes from. It's for people that are not investors and they're not looking to run a home as a business. So the problem is when you use, when you're working backwards and you use your final value as a residential number, the ARV based on comps.

But then you're buying in the name of an LLC, which forces you to use commercial lending. in some cases, you end up with this incongruency that Jamie is experiencing. The bank is telling him the property's worth less than it is if it was a comp because it's not bringing in as much revenue. Now, Jamie, here is the advice that I would have to give for you now that we've explained how this whole thing works.

Transfer the title out of the LLC into your name or find a lender that will let you borrow the money with a property held in the LLC. So I have a mortgage company, we can do that. We can go to people and say, hey, you own this property in the name of an LLC, but we see that you're the person who's basically managing it. We can get residential loans for those people with some paperwork to be filled out.

You need to find a broker that can do something like that. If you can't transfer the title out of the LLC into your name and you're just going to have to deal with it because you're going to get better financing options that way. Or keep it in the LLC and you're just going to get a lower ARV in this case and maybe refinance it later when you've increased the income stream. But in general, the best lending programs go to residential real estate. and that means that you oftentimes have to own it in your own name. So that's a big bummer that you're in that situation and you're not going to get as much out of the house as you wanted,

but this is a great learning experience for everybody else that the whole buy a property in the name of an LLC isn't always the best bet. And this is why it restricts your financing options. Now, that being said, what I say in the Burr book is that you should get pre-approved before you buy the property, before you start the process, get pre-approved first. So Jamie, if you were to go to a lender and say, here's what I want to do. Will this work? They could have told you right off the bat, no, if you're buying it in the name of an LLC, it's going to be evaluated differently. So, guys, don't skip that step, especially when you're using the Burr method. Talk to the lender, which is the last step of the Burr method first.

I know it's last in the process, but we always want to start with the end in mind. So you should actually start with the refinance and get that squared away first. And then the second to the last process, which would be the rent, okay, that would be the next thing you'd want to figure out. like, is this in an area that I want to buy in? Do I have a good property manager? And then the third to the last step, which would be the rehab, that's where you want to figure out, do I have a contractor? So even though you start with buy and you end in repeat, you actually want to start your process on repeat and then refinance and then rent and then rehab and work your way backwards before you get

to buy. All right, everybody, let's head to the forums and look for what people are asking in the Facebook group and on the Bigger Pockets website. Tyron asks, when working the Burr method using hard money lending. Is it better to get off-market deals through wholesalers or undervalue markets deals with a realtor? If doing the wholesaler route, is the realtor I'm working with expected to help with closing? Okay, Tyron, this is really good. Basically, this question comes down to should I use a wholesaler or should I use an agent? And really this is independent of the Burr method. So even though the question was asked in that context, the answer really doesn't have anything to do with the Burr at all. It just has to do with real estate in general. There is

no right or wrong answer for where to get deals from. Here is what you're likely to find. If you go through a wholesaler, you're going to get less representation. You're not going to get a fiduciary duty. You will be exposing yourself to more risk. Now, that doesn't mean every wholesaler is going to expose you to risk, but your odds of being exposed more risk are higher with a wholesaler because they are not a licensed fiduciary that is legally obligated to do what's in your best interest. Now, many agents aren't very good at doing that anyways. Okay. So there is no, that's why I can't just say go this way or this way, because there's bad apples and every single. single group. But in general, there's going to be more bad apples in the wholesale group when it comes

to looking out for your interest. Now, the opposite is true as well. There's going to be more bad apples when it comes to finding good deals on the real estate side. It's typically harder for agents to find you as good of a deal because they're representing you on properties that everybody else is seeing to. So the reward tends to be higher on the wholesale side because you're getting an off-market deal that less people are looking at. But the risk is also higher on that side as well. and you can lose a lot more. And that's typically why the advice that I give is for your first couple deals, you should be using an agent.

Don't worry about the huge upside that you're trying to get on your first deal. Worry about not losing money. I believe that's Warren Buffett's first reel of building wealth is don't lose capital. I totally agree. And when we first learn to ride a bike, we don't jump on a motorcycle that's 1,000 Cs and say, here's how you're going to learn. We start on a small bicycle with training wheels. And the upside is much less.

You can't go as fast. But the downside is also much less. You can't kill yourself. You're just going to fall over and maybe get scraped. So there is a normal progression of how we learn anything. You start off as a white belt and you just do a little bit of stuff. And then you generally progress into where you're actually rolling with other people and then sparring with other people. But you don't, on your first day, jump in there in a full contact mixed martial arts fight.

And that's the same thing I would say for investors. Don't do something that could ruin your entire career on your first deal, where you lose all your capital and you ruin your wealth building future. Just like don't step into a cage on your first day of a martial arts class. and ruin your entire career by having traumatic brain injury because you don't know how to protect yourself. In general, that's the advice that I would give. Now, you also asked, if I buy a wholesale deal, can I get help from my realtor? And this one comes up a lot, partly because I am a realtor and people come to me for this. And the short answer is no.

Realtors are not being paid by their clients. Hardly ever does a person pay their buyer's agent. Now, I pay mine, and I know other people that pay theirs as well. They're smart. They get better service and they get better deals by paying their agent. but most people don't want to pay. That's normal. We don't want to throw money away, and that's often how it's perceived.

So what happens is we go to a realtor and they get paid by the seller for finding us on market deals. If you're going to look for something off market and your realtor's not getting paid, no, you can't go ask them for help and protection and everything after you just basically screwed them out of their commission and said, you're not going to get anything. So you kind of have to pick one side or the other. As far as undervalued deals, guys, let me make this quick point before we move on to the next question. I keep saying the rules of real estate are changing. The rules really of wealth building overall are changing.

And that's because the economic policy of our country is changing. Now, this is a very nuanced topic, and I can't go into it too much right here on this question. But here's what I want to say. I'm the burghai. I love finding below market deals. I am not someone who throws money away. I only pursued deals if I could get them below market value. Here's where I've changed.

That was really important when prices were either growing slow. lowly and steadily or not at all. You had to get something below market value to be able to make money. That was your guarantee buying it right. With us printing this much money and this lack of supply, it's not as important that you get a great deal right off the bat. I am not telling you to throw money in just anything. So please, if that's where your brain went, that's not what I'm saying. What I'm saying is it's not as important that you get it under market value right off the bat because six months later, 12 months later, with the way that prices are going up, you will have equity. if you just wait. Now, if the market's going down or if it's staying the same, the rules are different.

So you have to go into the deal with a much healthier profit margin. I'm just saying the real estate I'm buying right now, I'm not really super concerned with it being way below market value. I'm even okay with it paying above market value a little bit in the beginning because I know if it's really a really good area, a really good neighborhood, a really good property, it's going to be worth so much more in a year that if I got it for 20,000 less than somebody else, but it's got up $80,000, then I just made $60,000 instead of them making $80. It's not the end of the world. It's much better than buying nothing, okay? So I'm not saying be reckless, but I am saying understand the rules have changed. And when you're trying to burr, if it takes six months, there's a very good chance that

over a six month period, that property will have increased in price by enough that you got your equity that way. Now, this does make investing trickier, and it does bring some speculation into the game and for a long time we've said don't speculate don't speculate it's just not that simple anymore don't over extend yourself do not put yourself in a financial position where you could lose a property because you were speculating and needing the property to go up in value but it isn't wrong to plan that it's likely to go up in value and work that into some of your deals especially if it's wait for it to go up or just don't buy real estate at all all right next question from albert longoria hi david i must be doing something wrong i've been following you remember

Brandon for a while now, and I've analyzed over 20 multifamily properties in my city, which is Austin, Texas. Using the BP calculators, but every single property comes out to be a bad deal where the expenses are a minimum of $600 more than the gross income. I even had one property's expenses $1,500 more than the gross income. What am I doing wrong? Albert, this might be my favorite question of the day so far, because this is what every investor is asking themselves so far, at least every newbie, and I'm so glad that I get to address this question. And I can guarantee you that a lot of our listeners just lean forward and perked up because they're thinking the same thing as you. What are you doing wrong? You're probably not doing anything wrong. If you're running the analysis

and you're seeing that the property is losing money, you did something right. You avoided buying the wrong deal. You're not going to buy a property that's costing you money. So don't look at it like right or wrong, okay? Finding out that the property is losing money means you did it right. What your real question is, is how do I find a deal that doesn't come out negative? How are all these other people finding cash flowing properties and I'm not able to? And I think that's really what you're trying to get at. And here's a few things that I want you to keep in mind. Life in general works on a spectrum, okay?

You can't have your cake and eat it too. So on this spectrum, I've found several things are likely to be true. You cannot have high reward and low risk at the same time. Okay? Low risk and low reward go together, high risk and high reward. go together. Usually, you cannot have cash flow and equity at the same time. There are markets that are really good for building equity. There are markets that are really good for having cash flow. You rarely ever find them in the same place. I want you to understand there's a trade-off

with how life works and that shows itself in the world of investing. You are evaluating properties in Austin, Texas. Austin has seen one of the strongest run-ups in price appreciation, both in rent and in home values of the entire country. Austin, Seattle, San Francisco, Madison, where else in Portland, Miami. A lot of the areas where tech companies are going to have seen a huge increase in demand and then in value. There's also limited supply of homes in those areas. You can't just build more in Seattle or in San Francisco or in Austin because there's a limited

geographic area. Now, that's why people are drawn to it because the appreciation is. is massive. And when I say appreciation, that doesn't just mean the value of the asset. It also means the rent associated and therefore the cash flow. Okay. You're basically taking a very high equity area and trying to find cash flow in the same place. And maybe what you're doing wrong is not understanding that you can't have both. You ever hear people talk about investing in Indiana? There's a ton of people in Indiana right now and they're usually newbies. Why is that? Because Indiana is a very strong cash flow market. You can hit the 1% rule to 2%

rule much more frequently. Now, what's the downside to that? You don't get a lot of equity. You don't get appreciation. The property 10 years later is worth roughly the same of what you paid for it. Maybe if you mark for inflation, it's exactly the same. That's why I don't personally invest in Indiana, because that's not what I'm looking for. But if you're looking for cash flow, that may make a lot of sense. Here's what I'm getting at. You can't have the best of both worlds. If you want to invest in the hottest market in the country, you might be negative cash flow for the first couple years. Now, if you look at that over a 30-year perspective like I do, I don't care. I'm fine being negative cash flow for the first couple years.

As long as I have enough money in reserves and enough money coming in from other properties, it will not kill me to be negative cash flow for three, four, five years out of a 50-year time span that I own the property. What you're thinking is you have to be positive cash flow in year one. Now, for many of you, that is the case. You do need to be positive cash flow in year one, okay? Not everyone should be investing the same way as me. my life and my finances are set up differently than a lot of yours. But if you're in a position

where you have to have cash flow, Austin, Texas is the wrong place to look. The other thing that you might be having trouble with is that you're looking at multifamily properties in that market, which everyone else is looking for too. So your competition are people that are not investors, they're house hackers and house hackers are going to beat you every single time. So if you're going against a person that's currently spending three grand a month and they can go buy a fourplex and reduce the amount they come out of pocket to $1,000 a month because they rent out the other three, they're going to be willing to pay more for that thing than you are. And that's part of the problem is who are you competing with? So you got a couple options. You could buy my book long distance

real estate investing, learn how to find properties in a different market where there's less competition and you could find a property that will cash flow. Two, you could adjust your expectations. You could buy a property that isn't going to cash flow super solid in year one. But if you look at the projected rent increases in the future, it will. And you're going to make more from appreciations. Now, if you do that, you might have to change your finances. You might have to spend less money. You might have to not buy the nice car that you want right away. You might have to make some sacrifices right now to benefit in the future.

Or three, become a house hacker yourself. Okay? Don't buy a fourplex as an investment. You got to put 20% down. Buy a fourplex. Live in one of the units. Rent out the other three for a year. Then move out of it.

And it will probably cash flow at that point. Okay. So you've got a couple options there. But the thing I want everyone to take away from this is this idea of the spectrum. quit trying to make everything fit in the same deal. Real estate is not meant to work that way. Question number three from Nick Capilar in areas with low appreciation year over year, but decent cash flow. What minimum cash flow should I target per unit on a 150 to 250,000 multifamily property? As a first time investor, the properties I'm looking at are $100 to $200 per unit,

and I'm not sure if this is good. Additionally, one realtor I've spoken to told me this competitive of a market, it may be better to avoid FHA loans in order to compete with cash buyers or those who waive inspections. Want to know your thoughts on how the loan type matters and getting the officer accepted. All right, this is actually an incredibly good question. You guys are crushing it today. And I'm getting to talk about things that are often frowned upon in the real estate world. Now, just so you guys understand my perspective, I am an investor at heart. I like finding good deals. I am an agent by trade. I have to figure out how to represent clients. So I'm one of the few people that actually sees both sides of the spectrum. And I think that's why I'm qualified to give some advice

here. And I just want to sort of offer this to the people that tend to have a closed mind and look at the world and say, if it doesn't cash flow, don't buy it. If they don't want to take your offer, just write 100 more. You don't have to be that rigid. There is some flexibility with understanding how to make things work. So let's go to the first part of Nick's question. In areas with low appreciation year over year, but decent cash flow, what minimum cash flow should I target per unit on $150,000 to $250,000 multifamily property. I can't tell you what to target. I know Brandon Turner does target that $100 to $200 a month of what we call. He has a name for like pure cash flow or refined cash flow. It's basically after you've calculated for capital expenditures, maintenance,

reserves, this is how much that he has left over. So that's not bad. The problem is if it's in a low appreciation area, typically rents don't appreciate either. And I don't love investing in in place where the best year I'm going to ever have is the first year that I bought it. I like investing in places that every year gets a little bit better than the year before or a lot better. And I'm even willing to start behind the eight ball to do it. So I'll buy properties in really high appreciating areas like the Bay Area, like Hawaii, like places where I know people are always going to want to go and they're very expensive.

And I might lose money in the very beginning, but I end up making so much more money later on that I was fine with it. What you need to ask yourself is, is if this never gets any, better and I achieve financial freedom. So Nick, if you hit your goals and you are no longer in a position where you need that $100 to $200 a month and it makes a big difference, do you still want to own that property? Is that a neighborhood that you want to be in for that much money? Oftentimes, right now, that sounds really, really good. But five years down the road, 10 years down the road, is that still going to be sounding good to you? I think that's a question you need to ask yourself

before you can find your answer. Now, the second part of this question has to do with the realtors advise that it's a competitive market, maybe avoid your FHA loan in order to compete with cash buyers and those who are waiving inspections. Here's the reality. We live in a capitalistic country, which is why real estate investing is possible in the first place. The whole reason that as blue-collar W-2 type people that are not born into wealth that real estate works is because we live in a capitalistic society and because there are people who make bad decisions oftentimes in life that allow us to capitalize on it. So every time you buy a foreclosure or a great deal from someone, that's because somebody else either didn't manage that asset well or didn't manage their own

finances well. And that's why it became a foreclosure in the first place. Now, I'm not saying look for other people's mistakes and pounce on them. I'm acknowledging the reality that that's the way things work. The reason that I can rent my properties out to other people is because they don't own real estate. Maybe they don't save money. Maybe they don't have a great credit score. Maybe they just don't want to own real estate, but oftentimes it's because they can't. All right. You got to take the good with the bad. If we love the capitalistic nature of real estate investing because it allows us to make wealth, we also have to recognize that supply and demand play a role in that. And right now, there is not enough supply for as much demand as we have. And so there's a lot of competition for

these houses. People want to live in them for themselves and they want to own them as investors. And you are now competing with all those same people. So rather than getting angry about it and saying, well, I'm just not going to do this at all if I can't buy an FHA loan. It is worth considering if this is the best idea. Now, what I always tell people is take yourself out of your own head and your own perspective and put yourself in the other persons. Yes, an FHA loan is great for you. You only have to put three and a half percent down and the PMI is pretty low and the rates are really good. We do FHA loans for our clients all the time. They're a great product. However, they're not as good for the seller. And here's why FHA loans have extra restrictions. They

typically have appraisals that come in lower. Now, I don't know if that's actually something that is true or not, but it is perceived by sellers that FHA appraisals will come in low. That people using FHA loans often have lower credit scores and they often have less money to put down. Now, in and of themselves, that doesn't mean that the buyer is not going to close or they're not qualified. And every time you get a buyer, that's what they keep saying. I should be able to use my VA loan just because it's a VA loan or FHA loan doesn't mean I can't close. and you're right. The sellers just don't care. And they may not know you or your situation. They just know your one name and your offer says FHA and there's 14 others that don't say that.

And their agent is telling them, based on statistics, these conventional buyers are more likely to close. These cash buyers are more likely to close. So rather than bang your head into the brick wall trying to force people to take your FHA offer, it might be worth going conventional and putting 5% down instead of 3%. and a half. I'm just trying to get people to open their minds instead of becoming rigid and closed-minded and saying this is the only way I'm going to do it and I'm just going to force this round peg into this square hole that yeah, if you were a seller and you're trying to get the most you could for your house and you had a lot of offers, you might not be looking at FHA offers either. So here's what I tell our clients. Either switch the loan product to become more competitive or go after a property that is less competitive. This is another mistake a lot of people make.

They want to use an FHA loan. They want to use a VA loan. They want to use lowdown payment, which is great for them. And as their agent, I'm encouraging them to do what's best for them. But then they want to go after the same properties that everybody else is going after. And you can't have both. It's that spectrum that we talked about. Go after the properties that nobody else wants.

Go after the properties that are uglier, that smell bad, that have been sitting on the market longer than other people's have. Go after the properties that have fallen out of escrow after being in escrow and the sellers have already made their plans. ask your agent to adjust the search to only show properties that have been sitting on the market two, three, four, five weeks already. Those sellers will not be nearly as picky about the fact you have an FHA loan. They just want a buyer. Okay. So you can make this work. You just got to ask yourself, what are you willing to let go of? Are you going after the hot home that everyone wants?

Are you going to let go of using the loan product that allows you to put the least amount of money down and you think is best for you? Thank you very much, Nick, for asking that question, because this comes up a ton in a hot market and the buyers have to change something in order to build a house. Now, for those of you who are sitting here saying, well, of course, David says that he's an agent. He just wants a sale. He just wants a commission. I get it. However, I'm looking to buy a house for myself right now too. And I frequently buy real estate. And I have to take my own advice all the time. In fact, most of this advice comes from what I had to figure out myself in order to buy houses or sell houses in the same markets that all of you are.

Speaking of that, let me give you an example. So I've been looking to buy a new house for myself in the Bay Area. And I want a house that I can house hack so that even if I don't run it out to other people, when I move out, it would cash flow or I would at least break even, but it will probably cash flow. Now, I'm coming across the same problems that everybody else is, even in the several million dollar range, they're getting multiple offers. And one of the things that I've found is that it's natural for a buyer to take the list price. and assume that's what a property's worth. And it's just not true. So I'll give an example. I had a house that I really, really liked. I went after it. It got five other offers. It was listed for $1.8 million. I went up to $1.85 and someone ended up buying it for a little like $2,050. Okay, so about $200,000 more than me. And my initial response was they can have it, right? I don't need to go that high. But here's what I found. Every other house that looked like that one was much higher than $2,0.50. And the houses that are in the 1.8 price range are way less nice than that one. And looking back, there's a part of me that's starting to think I probably should have paid more because the value

was definitely there. But just like everyone else, I got stuck into looking at how high over list price am I going. Now, there is something to say for not wanting to go over what it's appraised for, because then you might put more capital into the deal, which allows you to buy less property and lowers your ROI. So I'm not saying just throw money at every deal. But I am saying to take the house you like and compare it to all the other houses that you could get and make your decision based on that rather than just making it on how much you have to pay over asking price. You hear a lot of people saying, oh, you're going to have to pay over list price as if there's a cardinal sin of real estate that you should never ever do that. It's simply not true. Many realtors list their house for way less than they know they're going to get because they do want to get all that interest and create the bidding war.

And if you want to get one of these houses, you have to play that game. Hey, David. My name is Elliot. I'm from Utah. My wife and I just bought our first property about three months ago. We were renting a condo and we actually bought it from our landlords. The market got really hot. We were looking to buy a duplex, but we couldn't do it. So we just decided to buy this condo. That's worked out really well. We're actually right about to start doing a rehab and update it because our next goal is to buy a second property and do the same thing. Hopefully to house hack it. duplex would be fantastic, but we'll take anything. Any good deal that comes our way. My question to you is, we're doing our rehab, and I'm wondering, where should we go from here? We want to get to our second place and do another house hack, get another property, but what can I be doing right now to speed up that process, to learn and grow as a real estate investor, and to develop a network of people around me? Thanks. All right, thank you for that, Elliot.

So first off, congrats on the condo. Now, for most of my career, I haven't loved condos as investments. They're not bad, but they tend to not do as well as single family homes. But I do believe that right now in most markets, the condo is actually where the deal is at. Condos and townhomes are the softest spot in the market. People have left them and they're all chasing after single family homes. There's going to come a point where all these buyers get tired of getting skunked and not getting a property. and they're going to go to the condo market because they can actually get something,

and we're going to see a resurgence in condo prices. So if you're someone near me, hit me up because we want to get you into something, and that would probably be a really good bet. But if you're not, strongly consider if a condo or a townhouse could be a good starter home for you or a good property that you can get into, because I do think we're going to see a lot of appreciation on those in the future. Now, Elliot, to your question of what can you do in the meantime? Well, you're making the right moves.

You're rehabbing the property. You're going to pull your money out. You're going to go by the next one. Obviously, your next move should be to try to house hack something. Likely as single family residence because those offer more flexibility when it actually comes to what you can do when it comes to the house hack. So the first piece of advice I would give you is get very familiar with the market. Know what properties are going out.

Know what properties are selling for how much. Know how high over list price they tend to go and know how long they sit on the market. As far as getting your name out there, networking, putting yourself out there as a real estate investor, that probably won't have a lot of value for you at this stage in your career. And here's why. The people that are out there telling everyone I buy houses typically have financing lined up. They have access to credit or they have a lot of money themselves. They have strong relationships with contractors or rehab crews because they can make chicken salad out of chicken poop to say it nicely. They've got some resources that you're not going to have. So all that

effort spent in networking, even if you had people bringing new deals, you probably wouldn't know what to do to take it down right away. So I wouldn't worry about that. Instead, what I would actually tell you to do is to focus more on making money at your job. Can you get a promotion? Can you get into a career that's going to pay you better? Can you make your boss really happy and get more money? Can you work a side hustle? What can you do to start making capital so that when you do get your second house, you have more of a cushion? This is a huge thing. When you've got more money in the bank than what you need, you're more likely to pull the trigger on a deal that might scare you off even if it's a great deal, objectively speaking. So I would take this time to spend less and make more, build up my

reserves, build up my confidence, study the market so that when your year is up and you're able to go buy your next property, you're not starting from scratch. You already know what properties are worth. You're ready to start making offers right away. And you're not as gun shy about doing it. People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country. Their local teams handle the build, the property management, and the details, so you don't have to.

In some cases, investors even receive 50 to 75% of their down payment back at closing, and there are interest rates as low as 3.75%. They've been trusted partners with Bigger Pockets for over a decade, and if you want to learn more, visit BiggerPockets.com slash retirement. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise flagship fund.

Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features $4,700 a single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after. industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other

information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Real estate investors, the April 15th tax deadline, is coming fast. If you own rental property and haven't done a cost segregation study yet, you could be handing thousands of dollars to the IRS that you don't have to. These studies let you write off as much as 25% of your building and generate huge tax deductions. Costsegregation.com is an online self-guided software that makes cost segregation fast and affordable. So it finally makes sense for smaller rental properties purchased for as low as $100,000. With pricing under $500,000, and an average savings of over 25,000, it's just a no-brainer.

What's more, audit support is included by the number one cost segregation company in the U.S., but you must complete it before the tax deadline. Go to costsegregation.com and use code tax deadline to get 10% off your first report. Don't overpay the IRS. Head to cost segregation.com before April 15th. All right, rental property investors, listen up. Our friends at Dominion Financial already have some of the best DSCR rates in the industry. Now, they're the fastest, too. They just launched 10-day DSCR closing. That's right,

10 days, and they're still the only lender with a DSCR price beat guarantee. That means faster closing, the best terms, zero guesswork. That's Dominion Financial. Check them out at biggerpockets.com slash dominion. Again, that's biggerpockets.com slash dominion. Hey, David. My name is Freddie Canning. I live in San Antonio, Texas. Thanks for taking this question. Hopefully, you'll be able to answer it. I'm sure you, will. I'm a recent BP pro member, I guess about three or four weeks now. I'm also reading your your bird book and I've listened to about 100 podcasts and I really wish I would have read your burr book a few years ago. I have two single family properties right now that I'm looking back now,

I wish I could do it all over again. I would definitely do the burr method where you suggested buying out right in cash and then refinancing from there. But we are where we are right now. Both, luckily do cash flow a bit about about $200 to $300 a month, depending on the property. I did a conventional loan on the first one and hard money and refinance on the second one without even knowing it did that. But I guess my question to you is I do have the cash either in direct cash or I can take a heat lock on my primary residence where I have about $300,000 in equity. And I was considering whether or not I should buy out.

my first property and then cash refi it to buy out again the second property and cash refi and continuing the bird method or should I sell those two properties and take the cash ticket out of that and just restart on the bird method going forward. I'll take time to answer my question and appreciate it. Thank you. All right. Thank you for that, Freddie. Now, if I'm understanding you correctly, you're saying that you've got equity in your primary and two rental properties. Those two rental properties you wish you had used the burr method, which probably means you wish you had bought them at a reduced price, added value, and got your money out, which would lead me to believe the reason you don't love those deals is because all of your capital was left in them. Now,

your primary still has equity. So you've got some hope here. But what you asked was, should I do a helic on my primary, pay off the rental, then refinance it? That actually wouldn't make economic sense for you if that's actually what you're asking. Because paying off the loan and refinancing it. I think what you're saying is can I restart, like reset, just start from scratch and then refi. The problem is burr only works when you're adding value to the property. You either bought it below market value or you added value through rehab or some combination of the two. Simply paying it off, meaning like you paid cash for it, isn't going to add value. So when you go to refinance it, you're not going to be any better of a situation you're in

than you're in right now. Here's what you can do. The Burr method by rehab rent, refinance, repeat, doesn't have to all be done within a six month period. This will still work if you do like a delayed burr. So you buy, you rehab, you rent, you wait a couple years, then you refinance. The principles of burr will work the same, whether you do it all in a six month period like I did or whether you do it over a six year period. You may have enough equity in those homes that you could refinance them and get some of it out. Now, as far as taking the HELOC on your primary, if what you really want to do is burr, my advice would be take the HELOC on. on your primary, take that chunk of capital and buy a third property. Just keep the other two

where they are, buy a third fix or upper property that you're going to burr and just start over. This is the awesome part of real estate is when you buy it right or you buy in the right area and it goes up in value, it's very forgiving because now you can take that chunk of cash and make up for the mistakes that you made on the first two. So rather than maybe throwing good money at bad, right, like those properties don't benefit. Unless you can fix up their value by putting money into them and then refinancing it. If there's some way you can add value, maybe. But if they're already sort of tapped out, don't put more money into them. Put money into the third property, or I guess it would be your fourth property because you own a primary and make that one work for

the Burr method. But whatever you do with that HELOC, make sure you put it in something that you can get it back out again. Don't sink all that money into a property that isn't going to go anywhere because then you are going to be frozen for a significant period of time as you either save up capital or that equity build in your other properties. All right. So are these questions and replies resonating with you all? I think that these questions give me a great opportunity to explain the fundamentals, the inner workings, kind of what goes on behind the scenes of real estate. A lot of investors listen to a podcast like these because they're looking for a quick answer that they can immediately go apply that will have some life-changing

impact on their game. But it usually doesn't work that way. Simply saying, go get a helock. Don't get a cash out. Doesn't really give you any ammunition. that you can use to make any significant change. I think it's better to understand the principles of when a HELOC works better versus when a cash out refinance works better or how to use HELOC money versus how to use cash out money or the idea of the spectrum. When you guys ask these questions, I get to break down what goes on underneath, sort of educate you guys on the inner workings of real estate. And then the answers tend to just come to you. So for our listener who wanted to know, what am I doing wrong? Am I analyzing these properties incorrectly? Nothing works in Austin.

know you're not doing anything wrong other than maybe you shouldn't be buying in Austin. Or if you are buying in Austin, maybe you need to adjust your expectations and give yourself a longer horizon to invest in. And that allows everybody else who's listening to know, oh, that's a thing. I can take a five-year approach or a 10-year approach. I don't have to cash flow in year one right away. And I think that's beautiful because I don't get a chance to share what I do in my own portfolio, but I rarely ever look at year one results when I'm buying real estate. I'm not buying it for a year. I'm buying it for the rest of my life. Okay. So I tend to look at the big picture and I can recognize that even if I'm not making a ton of money right away, as long as I'm making money over the long term, that's good. And

oftentimes the deals that have made me the most money overall made me the least amount of money in the beginning. So I really appreciate you guys asking these questions. If you're listening to this and you have a question, but you're afraid of looking dumb, don't be. There isn't anything dumb. And even if for some reason it was dumb, it gives me a chance to break down how real estate works and educate the listeners because I think that the bigger pockets community should be the most educated community in the entire real estate world. All right. The next question comes from RETM, hard money loan versus construction loan to Burr. What are the pros and cons? I'm looking at two lenders and one suggested a construction loan. I was just wondering what your thoughts were. All right, first off,

a lender is going to suggest whatever they think is going to help you get the deal done so that they can close your loan. So what is a hard money loan versus a construction loan? A hard money loan is a loan that's backed by a hard asset like real estate. It's typically going to be given to you for 12 to 18 months with a higher than normal interest rate and a couple points associated with it as well. So it's a more expensive loan meant for a temporary purpose. A construction loan is a loan made against an asset you already have. So it's usually made in second position. And it's only for the rehab portion.

You can't use it to go buy the property. So if you need the money to purchase it, a construction loan is probably going to be. to be out. If you need the money just to purchase, the hard money is going to be your better option. But if you can buy the property without hard money and the construction loan interest is cheaper, just do that. Now, the cool thing with construction loans is they're typically going to be for a smaller amount than the total purchase price that you needed, like for the hard money loans. If you're buying a $300,000 asset with a $50,000 rehab budget, you don't have to use that expensive construction loan for the full $350,000. You're only using it for the $50,000,000.

of the rehab and you can use cheaper money to actually buy the $300,000 asset. Regarding taking advice from lenders in general, unless they're also investors, I'm a little more leery of that because lenders can help you with financing a deal. That doesn't mean they understand how the deal works. It doesn't mean they understand the asset class. They're not a fiduciary to you, so they're not obligated to do what's in your own best interest. If you're taking advice from an agent, even if they give you bad advice, they're not allowed to do that on purpose and they have a license and they can be sued. They actually have to carry Arizona Mission Insurance in case that happens. You don't get the same thing when you're taking advice

from a contractor or a lender. I'm not saying every lender is going to do this, but many of them are going to tell you whatever they have to tell you to get that deal to close. And so the minute that you're asking a lender, like what should I do? It's cool they're giving you options, but do exactly this. Go to somewhere like this kind of podcast and ask which would be my better options. My advice to you would be to try to use personal money first. Do you know anybody that if you feel solid about this deal, you could borrow their money at a lower interest rate than you're having to pay for the construction loan or the hard money loan. All right, from Brandy Joe, we've got a Burr refinance question. Have you recently refinanced based on the asset itself and the rental income?

And what kind of rates and discount points are you paying? Is this a portfolio loan? Or are you refinancing where they take into account all your personal income and debt and qualify based on that. Okay, so Brandy's question sort of has to do with, it looks like Brandy's trying to understand how does refinancing in general work and what are the different loan products here? So we sort of touched on this earlier. There's two kinds of refinances. You've got a residential loan and you've got a commercial loan. And within those two categories, there's all these different options that you can do.

Like we said earlier, when you're refinancing with the, the residential loan, they're going to base it on comparable sales. I think that's what you call the asset itself. If you're refinancing with a commercial loan, they're going to value it based on how much money it brings in, which you refer to as the rental income. So that's the first thing. On a commercial loan, it's going to be a little bit more expensive and it's not going to have the 30-year fixed rate that you're typically used to on a residential. At least most of them don't. So when you're asking for rates and points, depending on when someone's listening to this, they change all the time. But right now within my company, most of our residential people are getting

somewhere between 2.7 and 3% on our loans. And the commercial loans are probably more in the 4.5 to 5.5% range. But again, those commercial loans are adjustable. So as rates go up or down, those rates are going to move as well. A portfolio loan would typically be a loan that is offered by an institution where they're not going to sell that loan on the secondary market. So most residential loans are not portfolio loans because if you come to us and we give you a loan, we are actually brokering that loan to somebody else who's then going to take that and they're going to sell it to someone else and they're going to sell to someone else and it ultimately ends up as a mortgage-backed security on the stock market. Those are non-portfolio loans and you will always

get your best terms on a non-portfolio loan because they can be sold to other people who eventually hold them in these big like insurance company portfolios. The portfolio loans are typically going to have less good of terms, but they're available to people that don't qualify for the really good loans like me who have too many. So we called a portfolio loan because a bank or a credit union or a savings and loans institution is holding it on their own portfolio. So they are actually servicing that debt, meaning you are making your payment to them and they're collecting that payment all the time. And because they can't go sell it to somebody else, they're not going to give you a fixed rate of 3% or 2.9% for the 30 years you have that loan. They have to protect themselves. So every

maybe it's locked in with the interest rate you get, which is probably a little bit higher for five years. And then every year it will usually adjust after that. We call that a five one arm or adjustable rate mortgage. When you're refinancing and they take into account all your personal income and debt and you qualify based on that. That was the last part of your question, Brandy. That would be a residential non-portfolio loan. This is just a typical normal loan that if you're like, hey, David, I want to buy a house. And we help you go buy a house and then we get you pre-approved for a loan and then we get you financing. Those would be the types of loans where we look at what's your ability to repay it. Okay.

So what's your credit score? How much money do you make? How much debt do you currently carry? How much money do you have in reserves? How much can you put down? Those are going to be the loans that have the best terms and the best rate. And that's what we're looking at is can you, Brandy, repay this loan? When you go get a commercial loan, what we're looking at is can the thing you're going to buy

repay this loan? So we don't need as much paperwork from you. And that's why Brandon and I talk about when we, buy a big apartment complex or commercial unit, it's so much easier because they don't need anything from us. What they're mostly looking at is the asset itself, which is much easier to get the paperwork on. All right, we have time for one more video. So let's take a quick look. Hey, David. We just closed on our first deal and off market deal that we got way below market value and we bought in cash and we're wanting to do a burger on the property, turn it into glamping sites. At the end of the day,

we'd like to have eight structures, non-traditional homes on the property. Because they're not traditional, we can't get construction financing and we can't get mortgages. And so we're wondering how you would pull out your capital to be able to scale and build these as quickly as possible. We're using our key lock on our primary residence. So we'll be limited to the extent of those funds. After that, we'd like to be able to do some sort of bur on it and see if we could possibly do a burr into a commercial property or what your thoughts would be on doing some sort of bur on raw land and non-traditional structures. Thanks for your help. Really appreciate it. Okay, so this is actually kind of an exciting project that you're going on. A few pieces that I want to

highlight before we get into it. Let's assume that the permitting and all the legal requirements of what you're trying to do are in place. I don't really understand exactly like what city you're in or what the permitting requirements would be to do a glamp site. So I'm assuming you've already taken care of that just so nobody comes back and says that I gave legal advice because I'm not an attorney and I'm not doing that. First off, congratulations on getting a below market opportunity. This is really good. So what I understand is you bought a property for a below market value. You want to use the Burr method. So you're going to fix this property up and refinance it. And then on the land associated with that property, you want to put up a couple glamp sites, which is glamorous camping. It's a way

that people can sort of short-term rental a space in your yard, whether it's a tantran RV or a campsite, or whatever you're going to do that will generate additional income. So let's break down the steps that you need to do. And I'm going to highlight the parts that are most important for you to get right. Number one, you are correct in your assumption that you can't get a traditional loan to put up these glamp sites or to develop the land. So the capital that you're going to put into that is going to be hard to come across, which means you've got to get this part right.

When you do your burr method and you refinance, you want to get as much out of this initial property as you can. So as you're going to rehab it and make it worth more, you don't want to screw that up. You got this property below market value. Make it worth as much as you absolutely can refinance for as much as you can get out of it. And I would say if that means you pay a higher interest rate to pull out a higher loan of value amount, for you, that makes more sense. Get as much capital as you can. That's step one. Burr the property that you bought with the goal of taking out as much money as you can out of that deal.

Step number two is use that money as wisely as possible because it's going to be difficult or impossible maybe even to replace. Get a really good deal on the contractor you're going to use. Maybe take a little more time and do a little more research before you pick the person that you're going to use. Look where you can pinch pennies on your development of that land and the construction of these glamp sites because it's going to be a while before you get that money back and you don't want to run out of the money at this phase. To me, that's the hinge point of this whole plan. If you run out of money trying to build your clamp site because you didn't take enough out on the refinance, the whole thing's going to fall apart. If you can get to stage three, which is an operational property that has your regular home and the glamp sites that are making money and you claim this money on your taxes like you should and it runs at a profit like a good business is supposed to, you can then go to commercial lenders and have something they can refinance again. This is like a two-part burr. So you're burying the first thing for the property, the house itself on the land.

And then you're going to refinance a second time when you've improved it even more by adding the glamp sites. Now, in order for that commercial lender to give you the loan that you want, you need to show that those glamp sites are making money. You need a good bookkeeper. It needs to be documented. It needs to be claimed on your taxes. And it needs to make sense. But if you can get all those pieces together, you will very likely end up with the property that cash flows extremely strong. that you didn't come out of pocket at all for, that you pulled out all the equity completely and you didn't leave any of your own money in the deal, which is awesome. Now, there's several hurdles to this, okay? So while it has a high upside, it also has some risk associated with it, you might not do the rehab right on your initial refinance. You might have a harder time putting

these glamp sites together. There might be permitting issues with doing it. The neighbors might complain. You're taking quite a bit of risk in taking this on. So I don't want to make this sound like it's free money. But if you've got all your ducks lined up, this could be a really good life-changing opportunity for you with this one property that should put you in a position to have all your capital back out to go to it again. And that is perfect. All right. Thank you for that, Elizabeth out in Utah. Please keep us up to speed with what's going on with that project. I think this is something a lot of other people are really interested in. We recently interviewed Rob, a.k.a. Roe Built on the Bigger Pockets podcast. And he's doing a very similar strategy. So if this is

something that you're interested in, please go check out my interview with Brandon where we interviewed Roe Built. I believe that he also has a YouTube channel under the same name, R-O-B-U-I-L-T, and he's doing similar strategies. We've got another day on the books, another dropping of knowledge, and after the dust settles, I hope that each of you listening are more encouraged to invest in real estate than you ever were before. Now, there are two things that I've told people in life have ever given me more than I could give them. The first is my relationship with God and the second is real estate itself. You can't out give real estate. If you give by pouring yourself into this, committing to it, growing in knowledge, taking risks, taking your lumps, real estate will give you back so much more

than you ever gave it. So for those of you that have not bought a property, I'm going to encourage you to make that a goal for yourself that you will get at least one property. Control your housing expenses. Don't leave yourself at the mercy of your landlord who is going to to increase rents because that's what they're supposed to do to in order to maximize their investment. If you own a primary residence, I challenge you to have at least two houses. Owning two homes gives you incredible freedom and here's why. Anytime you sell a property that you live in, you are buying into the same market you sold in. So if you wait for prices to go up and you go sell your house and you get a bidding war and you

make a ton of money, you now have to go deal with the same thing on the buying side where you're going to spend a ton of money and you're going to be in the bidding war. And conversely, if you want to buy in a market where prices are down and it's a buyer's market and you can take your pick of what you want, there's tons of opportunity. When you go to sell your house, you're dealing with that on the other end. You have a bunch of people that don't want your house and they're going to lowball you. It's one of those situations that you can't win, you can't lose. You're just going to be in a stalemate.

So what I tell everyone is you should own two homes. You have one house that you live in. So if I have to sell in a down market to buy in a down market, that's okay because the other home I'm just going to keep it. I'm only going to sell it in an upmarket. If I'm in a down market and I want to buy another house, I can. If I'm in an upmarket and I want to sell my house, but I don't want to go buy, I can if I have two homes. Just having two houses gives you a ridiculous amount of opportunity and freedom and options when it comes to building wealth through real estate.

So that's what I'm going to advise to everybody that has one house. Get to two. If you already have two houses, well, guess what? You know how real estate investing works. most of the things that could go wrong you already understand you have a good grasp of the fundamentals it is now time to scale the portfolio you have and what's the first step in scaling getting the third house you get to see what i'm getting at here you've already given a lot to real estate let it give it back to you over 30 years there's nothing you're going to appreciate more outside of maybe

having kids or getting married than buying a house so thank you guys for spending this time with me thank you for your questions please keep them coming biggerpockets dot com slash david let me know what you're thinking, let me know what your questions are. And they can be anything, real estate, wealth building, mindset, psychology, whatever it is that's stopping you from moving forward. Let's get that figured out, get it out of the way so you can start building well too. 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 BiggerPockets.

your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calico content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.

The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.