Summary of "My Oklahoma BRRRR" – Episode 17 of The David Greene Show
Introduction
In Episode 17, titled "My Oklahoma BRRRR," released on November 5, 2024, David Greene ventures into a detailed walkthrough of a recently acquired property in Oklahoma. Diverging from his usual format, David offers a transparent and unfiltered look into the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy, sharing both successes and challenges encountered during the process.
Property Acquisition
Overview and Initial Assessment
David introduces the property: a three-bedroom, two-bathroom house spanning 1,260 square feet located in a decent Oklahoma neighborhood with commendable school districts. Acquired for $115,000, significantly below its Zestimate of $179,000, the property was secured through a wholesale deal facilitated by a real estate agent affiliated with Homevestors.
Notable Quote:
"It's only as complicated as you make it. There's not a whole lot of moving parts to these smaller deals, especially when they're rentals. And yes, this is a brrrr."
— David Greene [00:04:30]
Renovation Process
Initial Condition and Planned Upgrades
Upon acquisition, the house required substantial renovations, though manageable for seasoned investors. Key areas needing attention included:
- Bathrooms: Installation of a tub insert and replacement of shower tiles.
- Bedrooms: New flooring, paint, lighting, and fans.
- Kitchen: Upgrading cabinets, countertops, and appliances.
- Exterior: Addition of a backyard fence to meet property management requirements.
Challenges Encountered
Unexpected hurdles arose during the remodel:
- Roof Replacement: A hailstorm necessitated replacing the roof, adding an unforeseen $6,000 to the budget.
- Fencing Costs: Initial estimates were $4,000-$6,000, ultimately settled at $2,500 after negotiations.
Notable Quote:
"It's better to buy real estate and hold it for the long term than to not do that. It's better to add equity and add value to your net worth than to do nothing."
— David Greene [00:10:15]
Financial Analysis
Investment Breakdown
- Purchase Price: $115,000
- Rehab Costs: Approximately $30,000
- Total Investment: $145,000
Appraised After Repair Value (ARV)
- Estimated ARV: Between $185,000 and $195,000
Equity Added
David successfully added $40,000 to $50,000 in equity, leveraging the BRRRR method to enhance his net worth without fully cashing out.
Cash Flow Considerations
- Full Cash-Out Scenario: Pulling 80% of ARV ($148,000) would result in a monthly loss of $85 due to mortgage and expenses.
- Partial Cash-Out Scenario: Pulling 70% of ARV ($129,500) would yield a monthly positive cash flow of $100, while retaining $15,000 in equity and achieving an 8% cash-on-cash return.
Notable Quote:
"The goal of brrrr is not to get 100% of your money out. The goal of brrrr is to leave less money in a property than you would have if you'd bought."
— David Greene [00:08:45]
Challenges and Learnings
Unexpected Costs
- Roof Replacement: Unanticipated due to hailstorm damage.
- Fencing Requirements: Essential for rental appeal but added to costs.
Working with Wholesalers
David emphasizes the importance of maintaining good relationships with wholesalers, noting that backing out of a deal could damage future opportunities.
Notable Quote:
"Sometimes you have to weigh that in. How much does your word mean and how reliable are you versus how much more money is going to be spent."
— David Greene [00:19:30]
Conclusion and Reflections
Strengths of the Deal
- Market Expansion: Entered a new market with potential for future deals.
- Equity Growth: Significant increase in property value through renovations.
- Flexibility in BRRRR: Ability to choose between full or partial cash-out based on financial goals.
- Long-Term Value: New roof and low capital expenditures enhance property appeal.
Strategic Insights
David highlights that while the deal may not meet the traditional 1% rule for cash flow, the substantial equity added offers long-term financial benefits. By optimizing renovations and maintaining strategic financial decisions, investors can tailor the BRRRR method to suit their individual investment profiles.
Notable Quote:
"You can play with these things depending on what you have going on in your personal budget, how much you can afford to lose, and how bad you need that cash flow. The important thing is that equity sits in the property. I love it."
— David Greene [00:40:10]
Call to Action
David invites listeners to engage by sharing their perspectives:
"Let me know in the comments. What would you do? Would you have bought this property? Would you have done it the same way? Or would you have passed on it because it didn't have enough cash flow?"
— David Greene [00:45:00]
Final Thoughts
"My Oklahoma BRRRR" provides a comprehensive look into the intricacies of real estate investment using the BRRRR strategy. David Greene's transparent discussion of both the triumphs and trials offers valuable lessons for both novice and experienced investors, emphasizing the importance of flexibility, relationship management, and strategic financial planning in successful real estate ventures.
Key Takeaways
- Flexibility in BRRRR: Investors can adjust the extent of cash-out to balance between immediate cash flow and long-term equity growth.
- Due Diligence with Wholesalers: Maintaining integrity and reliability is crucial for sustaining valuable investment partnerships.
- Anticipate Unexpected Costs: Always account for potential unforeseen expenses such as structural repairs or necessary upgrades.
- Long-Term Equity Over Short-Term Cash Flow: Building substantial equity can provide more significant financial benefits than immediate cash flow discrepancies.
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