Each week on the BiggerPockets Podcast, Brandon Turner and I interview a different real estate investor and find out how they’ve built their portfolios. During these interviews, we both often discuss what we are doing in our own businesses, which strategies we are using, and how we are finding success in the current market. We do this to share ideas with the listeners, as well as to offer insight as active investors and business people ourselves.
Recently, I’ve noticed a few forum posts questioning why I’m not buying as many single-family rentals, and more noticeably, not using the BRRRR method. As the author of Buy, Rehab, Rent, Refinance, Repeat, I’m sure this raises some eyebrows. Rather than try to answer every question individually, I thought I would write a blog post to offer some clarity.
While I’m here, I’m hoping I can open some eyes to a different way of looking at both real estate investing and the overall process of wealth-building through real estate as a whole. It’s not very often that those who are just starting out as investors get a chance to peer behind the curtain at someone who’s a few steps ahead on the journey. My hope is that by offering full transparency into my business and wealth-building philosophies, you can find some information that will help you.
Before I begin, let me preface this by saying (for those who only read the title or don’t read the whole post) I am NOT saying BRRRR does not work or that it is “bad.” In fact, if you read the whole article, you’ll realize my decision really has nothing to do with the BRRRR method at all.
The BRRRR method is a tool. Building wealth is like building a house. At different times, a contractor will need different tools to accomplish this. It’s the ability to envision a design paired with the skills to bring it to life that make for a great home. Tools are just one of the ways a contractor uses their skills to bring the vision to life.
This post will share both my vision and the tools I’m currently using to build it with the hope I may inspire you to do the same.
So, here goes! Read on for nine reasons why I’m not using the BRRRR strategy—for now.
Related: BRRRR Investing: The Ultimate Guide to the Buy-Rehab-Rent-Refinance-Repeat Strategy, Made Simple!
Why I’m No Longer Using the BRRRR Method
1. I’ve Re-Strategized for the Time Being
At some point in the future, I’d like to write a book for BiggerPockets that details my three-step wealth-building method, so I can share with those interested how I’ve grown my net worth relatively quickly. It involves creating a synergy between three different strategies that all work together to exponentially increase your wealth. I combine financial independence (FI) strategies with business principles, hard work, and investing philosophies to capitalize on each part of real estate investing without having to run independent arms or companies.
The three-step process is:
- Make it
- Amplify it
- Invest it
Think of a wholesaler, who focuses on bringing deals in the door. Once they have the deal (the item of value), they have several exit strategies. They can wholesale it (making money aka step one), fix and flip it (amplifying their profit aka step two), or keep it as a rental (investing it aka step three). This example is obviously over-simplistic (as all examples should be), but it does a good job of highlighting the philosophy itself while admittingly leaving out a lot of the nuance or details of how to put it into practice.
Step one involves FI principles. You make as much money as you possibly can, and you save as much of it as is possible. This involves financial discipline, tracking methods, and investing strategies like house hacking (either as a renter to lower your rent or an owner to collect rent).
Step two typically involves less passive elements of real estate investing. Examples include making hard money loans, flipping houses, or wholesaling contracts. The idea is to amplify the money you have made and saved in step one.
Step three is investing for a passive return. This would be single-family rentals, commercial real estate investing, small multifamily properties, note investing, or other forms of passive investment. And yes, the BRRRR method falls directly into this category.
Part of why I am not BRRRR-ing as often right now is because I am focusing less on step three in my system and more on steps one and two (with a much heavier emphasis on step one). When I was buying large amounts of single-family homes and BRRRR-ing them, I did not have nearly as many options in steps one and two than I do now.
The fact is my life has changed, my skillset has grown, and my opportunities have changed, as well. One of the core tenants of real estate investing is the concept of “highest and best use.” BRRRR used to be my highest and best use. But now, my time is best spent in step one (and to a lesser extent, step two).
Please note steps one and two exist primarily to fund step three. If you can catch the point I’m making here, you’ll likely notice there will be plenty of time for step three—and more specifically, the BRRRR method—in the future.
The BRRRR method is one of the best ways for those with limited access to steps one and two to get directly into step three. By recovering your capital, you don’t have to spend as much time making it in step one. For those who have limited options in step one or two, BRRRR makes much more sense than those with strong options in steps one and two.
Related:
2. Returns Have Diminished in Single-Family Investing at Scale
Another reason I’m not buying as many properties now is the law of diminishing returns. Single-family properties did an amazing job at helping me achieve the first level of financial independence (having all my bills paid by real estate). If that is your goal, the BRRRR method is honestly a strategy that’s going to be tough to beat. However, once you’ve reached it, each new property becomes slightly more of a time-consuming headache and slightly less of a financial stepping stone.
Single-family homes are tough to manage. With 10 or less, it’s not so bad. With 30+, you have to hire, train, and “manage the managers.” Simply put, I don’t get as excited about a single-family house as I used to.
And that is totally OK! It does not mean you should stop buying them if you are in a different place in life or if your wealth-building strategy is currently different than mine.
If building wealth is the same as building a house, it would make a lot of sense to stack up, practice with, and master wood-based tools like various saws and nail guns that will be used frequently for framing the property. Once the frame is built, it’s a normal part of the process to move on to different tools that would be useful for drywall, flooring, or other finishes.
If you’re still chasing financial freedom and building your property’s frame, don’t be deterred by someone who is at a different stage in construction. You’re not doing anything wrong and it might even be a mistake to change your strategy to match someone else’s.
3. It’s Hard to Find Contractors Right Now
It’s not impossible to find contractors, but in a hot market, it sure isn’t easy. When I absolutely needed rental income to help me quit my W-2 job, it was worth the time it took to find contractors and manage them. Now that I don’t need that as much, my time is better spent looking to hire and train employees to help me “rehab” my companies as opposed to my properties.
The same principle is in place, but I’m using it in a different way.
If contractors were easier to find, I might be tempted to put more time into finding fixer-upper properties. The “return on time” metric is an important one to consider when you have multiple options. For those asking why I am not buying as many rentals right now, this is probably one of the angles they aren’t considering.
4. Financing Was Becoming Tricky
For those just getting started investing in real estate, financing isn’t much of a struggle. It’s pretty simple to get the first 10 loans as you can qualify for Fannie Mae/Freddie Mac products. These are low down payment, low-rate, fixed for 30 years, cream-of-the-crop loans. Once you get past 10, financing options become trickier.
I am not saying you can’t get financing for rentals. I know I definitely can. I am saying the effort it takes for me to submit copious amounts of paperwork to document every single property and every single business’s tax returns and other documentation is simply making real estate investing more difficult for me than it is for you.
In order for me to keep buying properties, I have to use commercial loans. This means I typically have to buy more than one at a time, fix them all up together, then refinance them as a group. It’s totally doable—but not totally simple.
The deals have to be really good for me to justify putting the time into them. As I’m not actively analyzing deals, I’m not finding as many of these as I was when I was constantly on the hunt.
At a certain point, my companies will be profitable enough to qualify for financing themselves, and I’ll buy homes in the names of the corporations I’ve formed. This will save me massive time and headaches putting the paperwork together and finding the documentation lenders need when I buy properties in my own name.
At that point, you’ll probably see me doing a lot more deals again.
Like I’ve said before, the solution for problems like these is to grow bigger. But growth can take time, and in the interim, I’m not buying as many properties.
Related: Before Hopping on the BRRRR Bandwagon, Consider This
5. I’m Not Chasing Financial Freedom
As I mentioned earlier, at this stage in my journey, “financial freedom” isn’t as important for me. I make enough to pay my bills, but not enough to make the impact on the world that I want to. In order to hit those goals, I have to partner with other talented, hard-working, smart people as we build our world’s together. My focus right now is on building leadership and influential skills as opposed to the analyzation and management skills needed to build and maintain a SFR portfolio.
In short, I’m chasing the ability to influence, guide, and lead others into a better life for themselves more than my own net worth or passive cash flow on a spreadsheet. I’m doing this through providing jobs, knowledge, and the ability to make more money to those I’m hiring for my teams to represent our clients well.
6. I’m Building Other Businesses
As I also mentioned previously, my primary focus is currently on building my lending business and my real estate sales team in California. This gives me the awesome and unique opportunity to provide opportunities for others looking to make a living through real estate. Real estate is a powerful wealth-building tool, but it provides opportunities in more ways than simply buying and holding a property.
It also comes with its fair share of challenges (hence, the need to grow in my leadership skills). There is a huge thirst for honest, knowledgeable, and trustworthy people to help others accomplish their goals. I’ve answered the call to respond to this challenge, and it’s taking quite a bit of my time and attention to make progress with it.
Just like you, I have to start at the beginning with all the frustration, pain, and doubt involved with making progress and building momentum out of nothing.
I hear you. I relate to you. I understand how badly you can want the “easy button” solution.
By always starting from the beginning in some way myself, I stay relatable to others in a similar situation. I think this makes me a more useful asset at BiggerPockets and helps me to do my main job (being the best real estate educator I can be) much better.
7. I’m Helping Clients Build Wealth
I saw the impact real estate (and the wealth it provides) had on my overall quality of life. Now, I can’t help but want that for more people. For those committed to taking the action required to change their position—and willing to pay the price to do it—I’m 100% committed to representing them and helping them get theirs.
My mortgage company was created to make less profit but have better rates for my clients. The agents on my team have been recruited not to just be great salespeople but to also relate to the fears of those they are representing, be skillful in finding comparable properties for valuation, and be capable of running numbers.
The more people we help buy a house—or just as importantly, the more money I can make for sellers when they sell—the better I feel about the role I am playing in the real estate community as a whole.
I don’t mean to brag, but I know I’ve become very good when it comes to representing clients. This feels really good inside and is a rewarding way to feel every day. I don’t get that same jolt out of buying my next BRRRR property. And there is nothing wrong with that.
There was a time when buying the next fixer-upper kept me juiced up for a week. If that’s how you feel when you think about it, that’s where you’re supposed to be, too! Keep doing just that, and don’t stop until you feel it’s no longer the right place for you to be.
Just because I’m doing something different doesn’t mean you should be. I’d feel terrible if I knew people stopped pursuing rental properties just because they saw me doing it. That’s why I’m sharing what I am in this post. I don’t want that to happen.
Related: How to Work with Lenders for the BRRRR Method (+ a Massive Open Secret to BRRRR Success!)
8. I Want to Learn About Other Areas of Real Estate Investing
Not everyone knows this, but my goals are much bigger than to simply meet the standard of financial freedom. BiggerPockets is an extraordinarily valuable company that brings massive value into people’s lives—life-changing value. As such, they deserve to have massively talented personalities working for and representing their brand in their effort to change lives!
When I became affiliated with this company, I silently made the commitment to become the top real estate educator in the world. This position deserves nothing less.
In practical terms, this means I can’t stay in my comfort zone of single-family homes and BRRRR-ing them to infinity. There are so many strategies and so many different kinds of people that the demand for knowledge and clearly articulated strategies is far too great for me to stay in my BRRRR bubble.
Does this mean I don’t believe in BRRRR? Absolutely not.
BRRRR is an incredibly powerful wave that can carry you to big real estate wealth. It simply means I believe in more than just BRRRR. BRRRR is one building block of an entire building I’m trying to construct, as I teach others how to build wealth through real estate and improve their financial positions—as well as their lives.
At this stage in that journey, I am focusing on representing clients in CA with buying, selling, and financing real estate. For those who don’t know, I’m a real estate broker licensed to sell real estate and originate loans.
While I work to help provide great service to my clients, I am also learning business principles, leadership skills, and how to inject the knowledge in my brain into those on my team so they can help clients the same way I can. This is very similar to the way BiggerPockets works to spread information.
There aren’t many great agents out there. As many of you know, it’s difficult to find them. I’m working hard to change that. The frontlines seem weakest to me at this position, so that is where I’m rushing to hold the line.
I want to be clear when I convey I do not intend to stay working in this area forever. When the time is right and I’ve made this a passive business (much like my rental portfolio), I’ll transition to teaching other agents what I’ve learned, spreading the knowledge so crucial to be successful, improving the profession of real estate agent, and disseminating this information to the masses through BiggerPockets.
At this point, I am sure I’ll move on and jump into the next area of real estate education to learn, master, and then teach others how to do the same. The best leaders are those who have been in the trenches, working on the frontlines, and then teaching those who came behind them what they have learned. I’ve never been one to watch from my ivory tower of safety, dispensing advice to others that I’ve never followed myself. While this may be safer for me, it’s not as valuable for those who follow it.
9. I’m Preparing for My Next Book Series with BiggerPockets
I’m currently working on a three-book series with BiggerPockets Publishing, meant to help real estate agents and brokers build, maintain, and grow a thriving real estate sales business. In my opinion, there is only one book written for this purpose that is worth reading: Millionaire Real Estate Agent by Gary Keller and Jay Papasan. And there is so much more specific knowledge that is needed for agents than can be contained in one book.
While writing and researching this book, I’ve given a huge effort to improving and dialing down on crushing it in my own business. The book is written based on what worked and did not work in my own practice. In order to make this book series as good as possible, I’ve thrown myself into the world of real estate sales with everything I have.
This has cost me a lot—but all good things do. I’ve simply had to make sacrifices in other areas. Buying properties for my own personal portfolio has been one of those areas.
I’m currently on pace to sell between $75-100 million in gross sales volume (during COVID-19 conditions) and around 120-150 homes this year. I’m anticipating the book series to be great. The systems we’ve formed and will share will be game-changing information for agents and brokers everywhere.
I’m very proud of this work so far, and I think people are going to love the books. Once you see them released, it will make a lot more sense where I’ve been!
It’s Difficult to Be Fully Transparent
It’s never easy to open up this much about my personal life or the areas where I’m still starting off and not crushing it yet. It’s hard to be this transparent, but isn’t that why we all respect it?
This is why I, and likely you, love this website. People are honest and transparent. They share their struggles, as well as their successes.
It is the opposite of the guru programs that paint an inaccurate and edited version of real estate investing to prey on the naive. I’m sharing this to reward all of you who are doing the same and looking to follow leaders who share that value system.
I hope this sheds some light on why I’m not buying as many rentals at this stage of my journey. It’s definitely not that I don’t believe in real estate investing. It’s that I want to be able to affect more people than just myself and build wealth for more than just my own portfolio.
It’s the BiggerPockets way to spread life-changing information to the masses. If I’m going to do that, I’ve got to put my lumps in just the same as all of you. I’m putting in the work to get started in a new area before I’ve earned the right to teach it. Hopefully, this helps shorten the learning curve for those who come behind me and results in a great, industry-leading book for you to read in the process!
Questions? Comments?
Let’s talk in the comment section below.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
