Posted on: April 06, 2022
WI 923 | BRRRR Method

 

As you pursue your real estate investing journey, you may have stumbled on the acronym “BRRRR.” ( Buy, Rehab, Refinance, and Repeat), an investment cycle used by savvy investors to build up their real estate portfolio. Join our whip-smart coaches, Grace Mills and David Dodge. These two will walk you through the process and explain how you can apply this to your business to become a better real estate investor.

The Ultimate Wealth Building Strategy – Breaking Down The Step By Step With David Dodge

Episode Transcription

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If you stop to take a look around you, you are going to notice that your market and your industry are becoming pretty competitive or maybe you are in a market that is already competitive. To truly dominate your market and be successful in your industry, you are going to need to stand out. There is honestly no way around it. To stand out, you need to find your voice and use it to tell your story, to sell and market what you uniquely can do for others that no one else can.

Radio is a marketing channel that will establish your voice as the go-to and allow you to stand out and dominate your market. I’m Grace, the Coach of REI Radio 2.0, and I have spent years testing out marketing channels to stand out and find motivated leads. Establishing our voice as the go-to in our market through radio has honestly made the biggest impact. Join me each episode as we explore how to find your voice, develop, distribute and establish yourself using radio.

I am super excited. I’ve got a fellow coach on, David Dodge, and I wanted to take a second to explore the BRRRR Method, but talking with David specifically about marketing. How do you apply the BRRRR Method? Are there certain properties that work well or do not? Is there anything that you could play with specifically in the marketing to get the best actual property out there?

I’m in the very baseline of what is the actual BRRRR Method if that is new to you. We always have a mixed audience of people that I have a little bit of understanding, some that are seasoned and others that are a little bit newer. I want to make sure that we break this all the way down for you on this show. I’m super happy to have David on. Thank you so much, David, for joining.

Thank you for having me. I’m so excited.

This is something that has piqued my interest or anything around marketing does. From my understanding of the BRRRR Method so far, I feel like there are a lot of students that I have utilizing radio and students that I know in general who run into rental leads or who may come in contact with leads of that sort. They are like, “What do I do? How do I play with this?” They are leaving an opportunity on the table.

When they are missing that opportunity, I know for a certain that they are missing out on a ton of money. That missed opportunity is going to end up being money that you lost out on. If it is something that I can start helping people get a grip on sooner than later, I want to make sure that they see those opportunities, know how to read them and know how to put some process in place for taking advantage of these actual leads. For a very baseline for those that could be a little new or do not have a full understanding, do you mind breaking down the BRRRR Method?

BRRRR is my passion. It is what I’d love to do. It is an acronym. It is B with four R’s. The first B stands for Buy, the first R stands for Rehab, the second R stands for Rent, the third R stands for Refinance and that is where the magic happens. The fourth R is Repeat. It is the ability to scale this strategy. You can use this strategy to acquire rentals with little to no money and it is very scalable. Some people even refer to the BRRRR Method as the BRRRS Method. All they are doing is replacing that last R of Repeat with an S for Scale. BRRRR is a strategy, but it is the best strategy in all of real estate because it allows you to acquire assets with little to none of your own money. It is amazing.

I’m sure you have got a couple of ears piqued already. You are like, “There is a method out there that I can be utilizing that does not require me to use my own money?” If you are excited about that, you’d want to keep reading this blog post. David, I’m sure the gems that you are going to end up sharing are well worth the read with no money involved. With the actual BRRRR Method, the first piece of that is to buy. You have to buy.

I like to dive a little deeper, Grace. It is to buy at a discount. When you are buying property at full retail, it is difficult to not have some money in it or some skin in the game. When you buy at a discount and you capture some equity right out the gate, all of a sudden, the BRRRR Method gets easy.

WI 923 | BRRRR Method

BRRRR Method: BRRRR is the best strategy in all of real estate because it allows you to acquire assets while using little to none of your own money.

 

Buying at a discount is and I know this from marketing, makes all the difference in your profit margins later. If you can come in and you can secure it cheaply, you can apply that to your marketing itself, to the actual property. It is a heck of a difference later down the line. Is there a point in time when you were not buying properties at a discount? For the sake of the readers for tracking numbers, how big of a difference was that for you?

For the first several years of my real estate investing endeavors, I do not want to say career because it was part-time for me, I did it wrong. I was buying for a retail of the MLS and via an agent. I was not able to use the BRRRR Method per se because I was paying retail. I was not buying at a discount and I was not rehabbing. I was buying rentals.

I was either living in them and renting rooms out or buying them to rent. I was leaving $30,000 plus in a property. I was acquiring an asset, but I had to bring $30,000 to the table. Ever since that, I started diving in and learning how to buy properties at a discount, it gave my business rocket fuel to explore this BRRRR Method. Now, all I want to do is acquire rental assets.

The most important thing is you have to buy properties at a discount. Once you buy a property at a discount, you have a lot of exit strategies at that point. I love to wholesale and still do wholesale, but if I can find a property that is in my buy box and makes for a great rental, that is usually decision number one. That is my first choice. If it does not meet that buy box, we are going to wholesale it but we are still marketing and getting properties at deep discounts.

If you have a deep discount, you have a lot of exit options. You can wholesale it. You can keep it as a rental as I like to do. Maybe you decide that you want to go fix and flip it or even do something creative with it. You have options now. Do not ever buy properties at retail value. Always find the discounted one.

You can have more wiggle room. David mentioned exit strategies. You can think of it as a wiggle room. It’s like, “I know I bought it lower than the retail price,” you have some room to play with. You are not at a tight margin where you are like, “I can’t make this move because I’m looking at only 1 or 2 options to move the property in.”

The lower you buy it, the more wiggle room you have or to David’s wording, “exit strategies.” With the actual buy piece, a lot of people are sitting there going, “I got to be able to buy a property, rehab, and refinance, but where is the starting place?” Where do they find to buy? Where do they find that property?

A lot of the leads that we get are direct-to-seller marketing. Get on the radio, cold call or send direct mail. There are hundreds of ways to go about marketing, but for the most part, the best deals are going to be off-market deals. They are not going to be listed on the MLS. They are going to be direct to the seller or, one of my favorites, direct to the wholesaler. That is a beautiful thing about the BRRRR Method, about being a landlord or about buying rentals. All three of those are the same, in my opinion here.

Don’t let a tenant-occupied property scare you. It is no different than a vacant property. It just has somebody occupying it.

The beautiful thing is that we are able to do the BRRRR Method and still buy up to 80% of ARV minus repairs. In fact, about 25% or a fourth of all of the rentals that we buy at this point are from other wholesalers. They are not even trying our marketing methods because we are willing to pay a little bit more than most wholesalers as long as they leave a little meat on the bone or get it at 70% and sell it to us at 80%. We love buying from other wholesalers.

I want to touch on the direct to seller and also the direct to wholesaler, but I’m going to jump back to marketing direct to seller. As you mentioned, you could use things like cold calling, radio and all of the above. I’m big on do not miss out on an opportunity. You want to cover all of your bases because there are some people that are perfectly fine with responding to your outbound marketing methods.

It is the same case, if you establish yourself, people are okay giving you a call to say, “Here is my situation. Here is what is going on with me. Can you help?” Why I’m saying that on radio specifically, the longer you are on, you are going to become established as the problem solver. Everyone’s real estate needs, they are going to automatically assume that you know what you are talking about or you have some connection to help solve their problem.

I have quite a few students that have run into this. They will get on a station and they will say, “Grace, for some reason, I’m attracting rental lease.” I’m like, “That happens. You are going to attract people with mobile homes even if you did or did not specify that in an ad. They assume that you can help them.” The student will say, “Grace, I do not know what to do with the rental lead. I have no experience handling rentals.” How would you handle that, David? Usually, I would say, “If you dial, you can always expand your network or maybe connect with a couple of landlords.”

There are so many things. First and foremost, radio is amazing and I’m in the process of getting back on the radio. I have been on and off the radio for several years. I was talking to my team saying, “We have got to get back on some of these stations. I’m missing out on some of these inbound leads.” I love the inbound leads. They are the best.

To answer your question, I’m looking for rental leads. That is what I’m looking for, but a lot of people that are reading now probably are not. They are marketing, they come and they learn radio or learn another marketing strategy but then they stumble across a landlord or an occupied property that has got tenants in it and they get scared.

Here is the deal. There are lots of buyers out there for these occupied properties. Do not let a tenant-occupied property scare you. It is no different than a vacant property. It has somebody occupying it. You may have to work around the schedule of the tenant to get and show it or view it. There may be a management company that you need to coordinate with or maybe the owner of the property is doing their own management, but that is it.

You are working around a schedule or two to build and get into it. If you are going to wholesale that property, you may have to work around a schedule or two to get your buyers in, but that is okay. It is not any different other than the fact that there is somebody occupying it. If you are a wholesaler or one of Grace’s students already that is coming across these rental leads. If you do not want to take them down yourself, which I suggest you do and learn because that is where you create wealth, there are lots of other landlords in your market. It does not matter what market you are in.

WI 923 | BRRRR Method

BRRRR Method: When buying property at full retail, it is difficult not to have some money in it. But things suddenly become really easy when you buy at a discount and capture some equity right out the gate.

 

Every city in the United States, for the most part, has got somebody renting a property out there. One of the best ways to find landlords, in my opinion, is always to go to the local REIAs. Meet the movers and the shakers. My goal when I go to a REIA is to find a couple of people that are doing big things and make sure that I know who they are, but also I want them to know who I am.

You got to get out of your comfort zone sometimes, go shake some hands and make some friends. That is a great place. Additionally, go online to different lists provider sites and find the sellers or the property owners that have multiple properties. I’m not talking necessarily about marketing here for motivated seller type of marketing. I’m talking more about building a buyers list, so when you do stumble across these occupied house leads, you now have a way to exit these leads.

Go to the REIAs, find the landlords, pull lists people that have multiple properties in their name or multiple properties in an entity or an LLC and reach out to these people like you would a motivated seller, but now the pitch is, “I have a property that is rented over here in this zip code. I see that you own a couple in the area already. Would you be interested in another?” That is it. Do not overthink it. It is so simple.

I can imagine it for someone that is going to purchase this for the first time, they are probably even overthinking that conversation of like, “Where do I meet them? What do I say?” It is very simple. “How are you doing? My name is,” and get the ball rolling. That is a great piece there for getting started. On the direct to wholesaler, I know you told me this before, but I’m interested in diving into that world. You can acquire properties directly from a wholesaler or an investor. How does that usually work?

It is not necessarily super easy to acquire a property from a wholesaler, turn around and wholesale it. I have done it a ton of times and I’m sure a lot of readers have as well, but it is going to be much easier to wholesale a property when you have a direct from the seller. We are talking about wholesaling here. Let’s switch gears for a moment.

If we are talking about landlording or buying rental properties and using the BRRRR Method, we are able to buy properties up to 80% of the ARV. I have even done it up to 85% of the ARV and was able to be all into these properties at 75% or 80% in the end, purchase plus rehab. When you are buying at a discount, you are capturing equity. That is the most important thing in any type of real estate investing is to buy at a discount.

If the property needs some work and you are able to rehab that property, oftentimes, you can increase the value more than what you spend on the rehab. Let’s say you spend $20,000 on rehab. You might have increased the value of that property by $30,000. Now, you got equity on the front side and on the backside. You can be all into the property for 75% or 80%. If that is what your lender will lend on the appraisal, you can be all in for nothing.

Back to your question, about a fourth of the deals that we are buying now are not even from our own direct-to-seller marketing. They are from all the other wholesalers in our market. The beautiful thing about the BRRRR Method and being a landlord is you can pay a little more for your properties. Even more importantly than that is, you can piggyback off of all the other efforts from all the other investors and wholesalers in your local market.

Wholesale investors are not chasing low numbers but the problem their clients face. They offer convenience to help them solve those issues by buying property and providing capital.

If you work a full-time job already or if you are a parent, you got your hands full and did not have the time to go set up all these marketing systems, make all these follow-up calls, run all these appointments or manage a team of virtual assistants, you can piggyback off of the other investors in your area. Another great place to meet these people would be at your local real estate club.

That happens for people. They are going, “I’m new to this. I got real-life going on. I do not have the time or maybe the energy to even figure out where to start and where to manage.” That is fantastic advice. When you get to the point, you start small and build yourself up. Once you get a couple of things rolling, you do go back and say, “Now, I will start my outbound marketing. I will go ahead and jump into inbound marketing for the balance with something like a radio.” They are contacting you, so it is not as much work as involved. Once you get this station secured and get your ad up and running, they are going to keep coming to you once they are ready to make a move.

David, this is more of my curiosity, especially if you have a student that is new to this and they are running on the radio or playing with investors and what is on their list. What do they look for? If I’m on the radio, I got a rental lead and I’m going, “I heard David and Grace’s show. I should probably keep this lead and figure out what to do with it.”

At this point, if you are getting the leads, figure out a way to make a profit on it. Everything that you have coming in, especially for something like radio, they are always going to be motivated. Do not let it sit and go to waste. There are ways for you to find some way to make money off of it. Where does that student go, “I have got a rental lead?” How do they know that it is even okay to buy and apply the BRRRR Method there?

Before I answer that, I want to highlight the fact that you said that radio is inbound. That is pretty obvious. The wholesalers and getting another wholesaler is also an inbound approach once you get on those lists. They go hand in hand so well together. If somebody wants to do some of their own direct-to-seller marketing but they do not have a ton of time, radio is an amazing option for them and get on those investor’s lists because it is going to be bringing leads right to your door.

To answer your question, what should you be looking for? It does not matter if the property is occupied or vacant, in my opinion. What you should always be looking for is a distressed seller that is more interested in your level of convenience and then them maximizing the value of the property. There are even situations where we will go buy properties that are not tenant-occupied and they do not even need that much work.

You would think, “Why would anybody want to leave money on the table with this deal?” There are millions of reasons that somebody would choose convenience over value. That is what we do as real estate investors. It does not matter if you are wholesaling or if you are fix and flipping or if you want to build a big portfolio of rental properties using the BRRRR Method. We are always looking for stressed properties and distressed property owners. Occasionally, you will come across somebody that is distressed and has a distressed property owner. They do not even often care about the money at that point. They want help, and that is what we do. We come in and we help them.

If you do have a property that is occupied, which is going to happen, what are you going to want to look for? You are going to want to look for at least a 20% discount on the ARV. That is going to allow you to do this with little to none of your own money. If you can get even lower, that is great and even better, but at least an 80% of ARV or a 20% discount.

WI 923 | BRRRR Method

BRRRR Method: The best deals are off-market deals. They are either direct-to-seller or direct-to-wholesaler.

 

You also want to make sure that the amount of rent that is coming in is going to cover your monthly payment if you get a mortgage and refinance this property down the road. A good rule of thumb is the 1% rule. The 1% rule means that you bring in 1% of the purchase price or what I like to do is say, “Does the rent justify 1% of my all-in price?” I like to use the all-in price because it makes it even easier and better.

If you can be all-in at 1% or collect 1% of the monthly rent versus the all-in number, an example would be you buy a property for $80,000, you put $20,000 into rehab and you are all-in it for $100,000 and the property rents for $1,000 a month. It’s 1% of the gross amount collected in the monthly rent. If you can hit the 1% rule, you are pretty much guaranteed to cashflow. That is typically what I’m looking for.

Let’s say a property owner has a property that he is asking for $150,000 and it does not need that much work, but that property is rented for $1,500 a month. That might work, assuming that there is not a crazy amount of repairs or capital expenditures that would need to get done. If there was, we would come in and say, “$1,500 a month in rent. We need to be all-in at $150,000. I know you are asking $150,000, but there is about $20,000 worth of deferred maintenance here. I would more than happily pay you $130,000 for it.” That is it. It is very simple. Can you go outside of the 1% rule? Of course, that is where you are going to need to dive a little deeper into the numbers, but the 1% rule makes it easy. That is why I like to use it.

I love that as a guideline, at least, for those that are starting off for the first time and trying to figure out what to play with and what not to play with or at least what to be on the lookout for. Your end goal ideally should be at that 1%. Could you potentially be slightly over or even in some cases, David, I had imagined you could be slightly under, but you want to be the 1%. That is where your cashflow is going to be. You’ll know, “If I pick this property up, as long as they are distressed,” and I’m glad you said that, in stress and distress, because a lot of people miss that. Pain is major.

If you can hit someone, who is like, “I’m in a lot of pain, I’m frustrated. I’m in a sticky situation.” They might have said, “I could have put this on MLS, worked with a realtor and got some extra cash. I will take a lower price. I will take this cash offer from you because I’m in so much stress now. I’m in such a crazy situation. I want out.” There are a lot of people like that. Do not get scared away assuming that, “I’m probably not going to be able to secure a great deep discount. I’m sure that someone is going to take my offer.” They will if you find the stress. The stress piece, and that pain piece, you do not want to miss out on that.

If I was to give one quick piece of advice to all the readers, you could become a better investor. It does not matter what you are doing. If you are wholesaling, fix and flipping or landlording. You can become a better investor if you understand that what you are selling is convenient. That is what we are selling. If somebody says, “I got this house. I do not want it anymore. It is a pain in my butt. It needs all this work.” They are willing to sell me that property at $0.50 on the dollar.

I’m going to do everything in my power, Grace, to make that person’s life easy and to make this transaction easy. I’m going to claw my way to buy it with cash, close super quick and not require them to do any cleaning, painting, decluttering or any repairs. That is convenience. If somebody isn’t willing to give us a big discount, all we need to understand and do is pull back a little convenience.

If somebody says, “I will sell it to you for $0.90 on the dollar.” We will say, “Can we close in four months?” We are not going to offer it for four days but if they want to give me a deal at 60% of the ARV, we are going to close it next Tuesday. Let’s go. It is a game of convenience and discounts. They go hand in hand. If somebody is willing to give you a big discount, offer convenience. That is what they are looking for.

The goal of wholesaling isn’t necessarily to buy rentals. Instead, it’s about buying assets that provide cash flow to achieve financial freedom.

That will go a long way. You have to keep that in mind as you are maneuvering. Always remember, you are their solution and you are an easy solution. You are convenient. It is like, “Here is this person who has a problem. They did not know where to start and where to go.” You are like, “I’m going to take care of it.”

There have been times when I will hire a moving company to come out and pay for it to help them. They are waiting on the proceeds of the sale and they do not have the money to get out or to move. It is like, “Whatever we can do to help get them across the finish line.” I have even picked up sellers and taken them to H&R Block to help them get their taxes filed. They could even sell me the property. Whatever we need to do to make their life easier and to get a deal is what we do. That is what we lead with, Grace.

Because of that, we are not chasing low numbers. We are chasing the problem that they are having and offering convenience to help them solve that problem. By us buying the house, that may or may not be the problem, but if it is not the problem, the capital from the purchase and sale of that home will often go fix or help the other problem that they may have.

For anyone that is reading, I hope that as you walk away from this episode, you do not forget things like that. Convenience and deep discounts are important. Whatever you are doing, make sure you are getting it and buying it at a discount so that you will have some wiggle room there available. In all essence, rather you are utilizing an outbound marketing channel or you are using inbound something like radio, you can apply the BRRRR Method.

Anyone that is in distress, deep stress and deep pain is a grab and go. As David mentioned, that formula there of watching that 1%. Those things are major. David, before we wrap, for those that are curious, what should they expect from your program? Are you going to walk them through or what should they expect?

Grace, before we jumped on, we were both talking about how both of our programs are six months long, which is amazing. I like to pour into my students and I know you do because I am one of your students. You have helped me tremendously over the years by getting me on and off different radio stations. That is the same thing that I want to do for my student. I want to lead by your example. You are amazing.

I want to help in any way that I possibly can when it comes to buying at a discount, rehabbing properties, renting or property management. I sometimes will do some leasing internally with my company. We also have 3 or 4 property managers that we were working with and the refinance. There are a lot of different ways to do it.

I have done it wrong in a million different ways. My goal is to prevent any of my students from doing those wrong ways and making the same mistakes that we have made. It is a six-month program. We meet twice a week for several hours. There is course access and we have a private community. I give my cell phone number to all of my students, so if they have anything that is urgent that they need, they can hit me up. I have dedicated two full days a week at this point to help get people into rentals and to show them how to do it with little to no money.

WI 923 | BRRRR Method

BRRRR Method: One of the best ways to find landlords is by going to your local real estate club. Go out of your comfort zone, shake some hands, and make some friends.

 

Even if they do 1 or 2 deals in the beginning and they leave a little money in, that is still a win. It does not necessarily always have to be no money out of pocket because we are going to learn as we go. The goal would be to get you to no money out of pocket as soon as possible. If we can do that on deal one, amazing, but even if it takes us a couple, that is okay.

Look at what I did in the beginning, leaving $30,000 in a deal. If you can get into a rental and maybe leave a couple of thousands in it, that is still a huge win. Grace, thank you for having me on. The program is student first. It is anything and everything that we can do to help them get into rentals and use little to no money. The goal isn’t necessarily to buy rentals. It seems counterintuitive. The goal is to buy assets that provide cashflow so we can achieve financial freedom. That is the goal and rentals are the vehicles.

Dave, you have so much expertise in this area that every time I talk to you about it, I’m like, “Huh.” You make me want to go back and look at my life like, “I have missed things.” It is why we preach heavily to you guys about do not miss those opportunities because we have been there. We are like, “I lost time, energy and money.” If there is any way that you can avoid that, like cutting into your learning curve by jumping into something like David’s program, it would be helpful for you. David, how do they sign up or where do they go for questions?

WholesalingInc.com/rentals is going to take you to a place where you can book a call or go to WholesalingInc.com and open the navigation bar, you will see the BRRRR Method Mastery Course, but again, the easiest way to find it as WholesalingInc.com/rentals.

Maybe you are reading this and you are going, “I might want to combine radio and the BRRRR Method,” it’s the same thing. It’s WholesalingInc.com/REIradio. If you do have a couple of questions because you are still going ahead. I do not know if this isn’t going to be a great fit for my business, at least for filler, to understand what to expect.

If this is going to work with you or how to combine it, anything we can help you with, feel free to jump over to WholesalingInc.com/REIradio. Thank you so much, David, for hopping on. You have said so much info and I’m excited about our audience. All of the pieces that they can pull from this one episode alone can make a heck of a difference.

They are walking away and realizing that the money for them, long-term, is going to be in rentals and how they can apply that using the BRRRR Method and even playing with something like a radio as an inbound marketing channel or any other marketing channels as well. Thank you for being able to sit here and stop your day to share all of the info you gave.

Grace, I’m happy to be here. Thank you for having me. We shared a ton of gold nuggets in this episode. You are an amazing coach. I love working with you and I’m excited to go get on a couple more radio stations here in my local market too. Thank you.

Thank you guys out there for reading this. We love being able to put all this content together for you but thank you so much to the readers. We will wrap up here and catch you guys in the next episode, where we can share some more of those golden nuggets. Thank you.

 

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About Grace Mills

WI 923 | BRRRR MethodGrace Mills is the coach of REI Radio. She has worked side by side with Chris Arnold during the initial program roll out, coaching & fulfilling student needs. For almost 8 years she’s managed and directed all marketing channels and split tested every element of Radio to help investors set up Radio in any market they choose. She has worked with investors & agents all over the United States and has helped many investors make thousands of dollars using Radio.

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