Podcast Summary: The BRRRR Package | Mortgage Monday
The David Greene Show
Release Date: January 6, 2025

Introduction to Mortgage Monday and BRRRR Package

In this episode of The David Greene Show, titled "The BRRRR Package | Mortgage Monday," host David Greene teams up with Christian Bashelder to delve into mortgage strategies that enable real estate investors to enter the market with minimal initial capital. The discussion promises to unpack the intricacies of the BRRRR method—Buy, Rehab, Rent, Refinance, Repeat—and explore whether this approach remains viable in today's fluctuating real estate landscape.

Notable Quote:

David Greene [00:00]: "If you've ever wondered how you can get into real estate with low money down, if you've ever wondered if the BRRRR method is dead... we are going to give you case studies of deals that we have done for our clients or ourselves."

Current Financing Landscape

David opens the conversation by addressing the present state of mortgage interest rates for primary residences and investment properties. Christian provides current figures, highlighting that primary residence loans are in the low to mid-six percent range, while investment properties hover between 7% and 8%.

Notable Quotes:

Christian Bashelder [01:34]: "Primary residence is going to be in the sixes... investments, about a point to a point and a half higher... from 7 to an 8% depending on credit and down payment."

David Greene [02:00]: "Our peak was October 2023... primary residences peaked at about a 7.99%, so 8% for primaries which put investment properties up at 9% plus."

Overview of The One Brokerage and Its Loan Products

David and Christian discuss their joint venture, The One Brokerage, positioning it as the premier resource for real estate investors seeking competitive and transparent financing options. They emphasize the brokerage's ability to offer lower interest rates, faster closing times, and a diverse array of loan products tailored to various investment strategies.

Notable Quotes:

David Greene [02:32]: "We wanted to give people fair, competitive, and lower interest rates because in a lot of cases people get quoted a high rate and then they could have done it for less later."

Christian Bashelder [04:03]: "I go out and talk to people that like the general public can't get in front of... I go through 900 different sources of capital... my margin and my cut that I make is built into the savings that I create."

The BRRRR Package Explained

The core of the episode focuses on the BRRRR strategy, dissected into its components:

a. Buy and Rehab: Bridge Loans

Christian introduces bridge loans as a means to finance both the purchase and renovation of properties with minimal out-of-pocket expenses. By leveraging bridge loans, investors can finance up to 90% of the project cost, significantly reducing the initial capital required.

Notable Quotes:

Christian Bashelder [09:57]: "Bridge, rent, rehab, refinance... we use bridge products to buy and renovate... we saved what, 80 grand... saving around 60% down to 30% of what was needed otherwise."

b. Rent: Adding Value

David outlines the importance of adding value through strategic renovations, which not only increase the property's market value but also enhance its rental potential. This step is crucial for meeting the benchmarks required for refinancing.

Notable Quotes:

David Greene [16:18]: "This is the first part of our BRRRR package...Rates are not nearly as high as what they used to be... short term rentals can be financed in ways that traditional rentals used to be."

c. Refinance: DSCR Loans

The discussion shifts to Debt Service Coverage Ratio (DSCR) loans, which allow investors to refinance their properties based on the property's income-generating potential rather than personal income. DSCR loans offer competitive rates and streamlined approval processes, especially beneficial for business owners and self-employed individuals.

Notable Quotes:

Christian Bashelder [34:44]: "A big benefit of DSCR loans is the lack of needing more documentation... DSCR is a home run for business owners."

David Greene [33:59]: "DSCR loans are 30-year fixed rates... you get options that are basically competitive with conventional but so much easier to get."

d. Repeat: Scaling the Investment

With the successful execution of the buy, rehab, rent, and refinance stages, investors can reinvest the reclaimed capital to acquire additional properties, thereby scaling their real estate portfolios efficiently.

Examples of Successful Deals

a. Oklahoma Property Case Study

David shares a case study of purchasing and renovating a rental property in Oklahoma using the BRRRR method. By leveraging a bridge loan, he financed both the purchase and renovation, reducing his out-of-pocket expenses from approximately $120,000 to $46,000 and projecting a substantial return on investment post-renovation.

Notable Quotes:

Christian Bashelder [10:56]: "We bought David this property and financed the renovations with a bridge product, saving him around $80,000."

David Greene [12:03]: "I have a 300% ROI on my money without a massive amount of risk here."

b. Client’s ADU Conversion in Florida

Christian presents another client example where an accessory dwelling unit (ADU) was converted into a short-term rental. This strategic renovation not only increased the property's value but also generated significant rental income, exemplifying the effectiveness of the BRRRR strategy.

Notable Quotes:

Christian Bashelder [27:11]: "She converted a separate structure into a master in law suite... generating $2,500 a month on Airbnb."

David Greene [29:13]: "They got a 43% return on the $70,000... impressive equity addition."

Hard Money Loans vs. Bridge Loans

The conversation differentiates between traditional hard money loans and bridge loans, emphasizing that bridge loans have become more affordable and accessible. Christian explains how bridge loans have significantly lower interest rates compared to the past, making them a viable option for modern investors.

Notable Quotes:

Christian Bashelder [13:44]: "Hard money loans used to be 15-19%, now they're around 10-12%."

David Greene [14:06]: "If you're fast, the cost of this money plummets... you're getting 90% of a project finance for a 5% interest rate. That's unheard of."

DSCR Loans vs. Conventional Loans

A detailed comparison highlights the advantages of DSCR loans, particularly for self-employed individuals and business owners who may struggle with conventional loan documentation. DSCR loans focus on the property's income potential, offering less paperwork and more favorable terms.

Notable Quotes:

Christian Bashelder [32:14]: "DSCR loans can sometimes be lower than conventional loans, which is really cool."

David Greene [34:44]: "For business owners, DSCR loans are a home run. They don't require extensive personal financial documentation."

Short-Term Rental Financing

Christian introduces the concept of financing short-term rentals within the DSCR framework, a relatively new and rare offering in the lending market. By leveraging tools like Air DNA, investors can project rental income based on regional short-term rental performance, enabling more accurate underwriting for properties intended for platforms like Airbnb and VRBO.

Notable Quotes:

Christian Bashelder [49:08]: "We developed a way to underwrite short-term rentals using Air DNA... it's rare but achievable."

David Greene [53:01]: "DSCR loans are exception-heavy... someone with non-traditional properties can still secure financing through brokers like us."

Best Practices and Final Tips

The episode concludes with crucial advice for investors: always plan your exit strategy before entering into a bridge loan. David and Christian stress the importance of aligning your financing options with your investment goals to avoid complications like defaulting on high-interest loans.

Notable Quotes:

Christian Bashelder [43:28]: "Plan your exit before you enter. Use the same loan officer for both bridge and refinance loans to ensure a smooth transition."

David Greene [44:43]: "Logical planning and partnering with knowledgeable brokers like The One Brokerage can save you from unforeseen financial pitfalls."

Conclusion and Contact Information

David wraps up the episode by reiterating the viability of the BRRRR method in the current market, emphasizing that with the right financing strategies, such as bridge and DSCR loans, investors can effectively scale their portfolios with minimal initial capital. He encourages listeners to reach out to The One Brokerage for tailored financing solutions and hints at future episodes covering related topics like tax strategies.

Notable Quotes:

David Greene [53:36]: "If you are a small business owner or have unconventional income, DSCR loans are a straightforward path to financing."

Christian Bashelder [57:34]: "Find me on Instagram at TheOneBrokerage, visit our website the1brokerage.com, or email me directly at christian@the1brokerage.com."

Key Takeaways

• BRRRR Strategy: Buy, Rehab, Rent, Refinance, Repeat remains a robust method for real estate investment, especially when supported by strategic financing.

• Bridge Loans: Offer a flexible and cost-effective means to finance property acquisition and renovation with minimal upfront capital.

• DSCR Loans: Provide an excellent alternative for business owners and self-employed individuals by focusing on the property's income potential over personal income metrics.

• Short-Term Rentals: Emerging financing options enable investors to capitalize on platforms like Airbnb, enhancing rental income and property value.

• Best Practices: Planning exit strategies in advance and partnering with knowledgeable brokers ensure smoother transactions and maximize investment returns.

For more insights and personalized financing solutions, visit The One Brokerage or contact Christian Bashelder directly via email at christian@the1brokerage.com.