DSCR + BRRRR: The Ultimate Real Estate Investing Duo

We're going to go over how Burr and DCR work together the perfect pair to create wealth in real estate everyone It's Mike Bunn with the cash flow company and say it doesn't matter if you're new in this business a long time Everyone's probably heard of Burr and maybe even DSCR loans But have you ever thought how they work together how they're the perfect pair to create wealth in real estate? Just remember Burr stands for you're gonna buy you're gonna rehab you're gonna rent it refinance it and repeat It's all about using the knowledge how to use the system It's about the hustle to find the properties putting that all together and exchanging it for cash instead of being a cash buyer Cash down payment you're using and finding value add properties finding properties that need some work to create that wealth let's just look at examples you understand the difference between What a traditional retail buy of a rental property is versus a burr and then we're gonna go through the strategy of the two loans Put together to create your burr Well, what does our typical retail buy look like when I say retail that means you're buying a property that's on the market That's fixed up ready to go and you're paying market value. You're paying what it's worth It's a praise value. Typically what this looks like is you are buying a property or let's just call it $200,000 and what you're doing is you're transferring some of your wealth some of the money that you have Into a down payment. I call it moving money, but it's the down payment of Moving the money from your checking your savings with your investments into a property So in this case, you can put 20% down you're going to move 40k from your savings Into the new property on top of that. You're going to get a loan. You're gonna borrow some money To buy this property and since you put 20% down you get an 80% loan So you're getting a loan for 160,000 so what you've done is you've moved money from savings into a property and You've obtained a loan for 160. What you've created here is no wealth. You haven't created anything. You just Moved money from one source to the other so that's retail. So now let's look at what Burr looks like just in case you're new to burr Need a bigger picture of it what it looks like now when we're thinking about burr It's all about you using the leverage using the rules out there of the loans To create wealth buying something undervalued buying a wholesale property We're putting the work into it bringing it up to value and then that extra value that you created is your net worth So let's go through a perfect burr example. So let's just say you buy a property for 120,000 so you're buying a property wholesale and when I'm talking about burr and some of the methods here It does take some time It does take some work to find the perfect not every property is going to be a perfect burr property And we're gonna put 20 grand into it on top of that. There's some closing costs. There's some holding costs So we're going to say that's another $10,000. So what we have into this property is 120 plus the 20 plus the 10 so we have a total of a hundred and fifty thousand dollars into this property And don't worry. I know there's a lot of people out there saying you can't find properties like that anymore We just had a person who found one at 50% all in they're out there They take some time. They take the knowledge to understand this whole process and it takes the hustle to look for the right property So what you've done here is now you have a hundred fifty thousand dollars into a property. That's worth $200,000. So what does this mean for you as a real estate investor is you found the right property use the proper tools Which is the two loans that we're going to go over next and have created wealth with burr Remember it was valued at 200 just like the other property that someone bought retail you now Oh 150 so you have created $50,000 in equity, which is your wealth That's part of the asset that you've created because you only owe 150 but it's worth 200 on the retail Remember all you did is transfer money From your savings over so you didn't create any wealth here you actually own the same property, but you have a bigger loan on it than if you worked on burr on this and Like I said, I know in Certain markets you may have to put in a little bit of money to make burr work We're talking about a perfect burr But even say you went through one of these processes and you had to put in $10,000 per property just to make it work You can still do four versus one burr works in any kind of situation with the right property We're gonna go through those numbers. We're gonna go through the loan here really quick. So the difference here is the burr created 50,000 and the goal is over three years three years to buy ten properties like this because When you're starting out when you're looking for properties Maybe you find two the first year maybe three the second year and five the third year because you got it going So over ten properties over three years What you've done Before you even start paying off the loan before you even start the amortization coming in before, you know increase and everything You've just created $500,000 in net worth that's an asset on your you know balance sheet That's why burr so powerful and that's why so many people Look to use it and if you set yourself upright if you understand the rules and that's what we're gonna go through next Anyone could do this. So to make burr work You're going to need to work with two loans two loans that work in harmony together first You're gonna need the buy loan. You're gonna have to purchase the property and during the purchase process You're going to have to repair you're gonna have to fix it up So it becomes market ready remember that person about it retail you want your property to be in that same category You may have to you know, clean it out. You may have to replace some bathrooms Whatever it may be you're going to have to repair bring it up to market and that's where the first loan comes in You're going to get a loan a bridge loan a fix-in rent loan the same as a fix-in flip loan But you're just gonna fix it and keep it You're going to use that same kind of product to finance the purchase and the rehab typically the worst case You want to see with this first loan is something that allows you to you know, we put 10% down So maybe 90% of the purchase they'll finance in a hundred percent of the rehab if you really look and really work and with some of the local people you hopefully you could get a hundred percent of the Purchase a hundred percent of the rehab all of those numbers have to be below 75% of the after repair value So when you come to the next stage So remember low number one that you're going to work with is to purchase it because once you purchase it once you rehab it Then you're gonna be able to use the appraised value the actual market value For the refinance if you don't already own it if you haven't done the work You're not gonna be able to use the appraised value to get the long-term loan now that you've bought it Fixed it up and rented it now. It's time for the long term. It's this is where you capture the equity This is where you get to use the appraised value and get a long-term loan You know that 30-year loan that you're looking for the DSCR comes into play here why it's so good is because Most loans like conventional even some banks if you're looking for cash out if you're looking to get maximum cash out 75 or 80 percent On a conventional loan and even most banks they require you now to have the property for 12 months We don't want to hold it in a bridge loan for 12 months We're looking more like, you know, three months, maybe six at the most but really three months So you're looking for a loan that does not require seasoning and that's where DSCR and most DSCR loans Require a maximum of three months. There's DSCR loans out there that don't require any seasoning What is seasoning that means how long you've owned the property in the conventional loan if you're looking for refinancing Like I said, they require seasoning which means you've owned the property for at least 12 months before they could do a cash out refinance Yes, they'll allow you to use the appraised value if you're just doing or paying off your current loan We're trying to use BRR to its maximum which means to get every penny out of that that you've put into it So you could get on to the next property That's why DSCR is so good with BRR because of the no seasoning for cash out So specifically what are the other reasons that BRR DSCR works better for BRR than your traditional conventional or banks? Is if you go to a bank and you're new to investing or you're new or you change jobs They're gonna want two years of history They're gonna want your personal income your business income for the last two years. They don't want to see you change jobs They don't want to see any Deviation from your employment or your income. They're also gonna like I said, they're gonna want the seasoning They're gonna want you to own that property and have it conventional at least 12 months So you don't want them holding a bridge loan 12 months and if you're new to investing They're not gonna be able to use the income from that property unconventional to actually help you qualify So you get to qualify for the property yourself based on that income That's where DSCR has the advantages It only looks at the property for the income as far as qualifying as long as the property at least breaks Even they call it a DSCR ratio of one. Don't worry. We have a free calculator You could use to calculate make sure the property lease breaks even that DSCR ratio of one So, you know that the property is gonna work so they're not gonna look at your tax returns They're not gonna worry about your job history They're not gonna worry how long you've been in this industry as long as the property cash flows breaks Even the property qualifies now you have to you know, go through make sure your credits good all that But you're not gonna have to have personal income taxes business income taxes And you're not gonna have to have the seasoning for 12 months. So if you want to get in Buy a property go through the whole process and then repeat it You're gonna have to have a product like a DSCR that fits up perfectly which is uses the property for income But then the seasoning is not there to hold you up to get to the next property So here's a quick recap buy the property buy that a good number buy at a 75% ARV and below all in all in once again means your purchase price your rehab cost Even if you can your closing cost and carry cost which is your monthly payment get it rehab as fast as possible Rent it out get it in the rental pool and renting it out as fast as possible Get it refinanced so you can repeat it speed is important So you want to make sure your numbers are correct before you even look at purchasing a property remember now We have a couple of free tools. We have the DSCR calculator So you can make sure the property qualifies for the DSCR ratio or break-even point before you purchase it We also have the burr roadmap which kind of walks you through is just a visual That you could walk through and if you're looking to take it to the next level We have classes that we offer both in DSCR and burr you can check that out with the link below now I know burr works and now the DSCR is here and a very active product for real estate investors It is the perfect pair. So go out start your portfolio start working on it today Remember, you know don't expect it to happen in one year But over the next three years you could build a portfolio that creates the wealth to give you the life you're looking for Thanks for watching. This is Mike with the cash flow company and we'll catch you on the next video