The BRRRR method
in Myrtle Beach.

The buy

Buying below market, where the rent is strong

Aim to keep the purchase price plus rehab budget under 70 to 75 percent of the after-repair value, what the house will be worth once it is fixed up. That difference is what covers you if the work costs more than planned.

The house also has to sit where rent is strong. BRRRR pays you back through a refinance, and that loan is judged on the rent the house collects, so a cheap house on a street with weak rent does not work. Needing both in the same house is what makes these deals scarce.

On the Grand Strand, dated single-family homes in Conway, Socastee and Carolina Forest are the usual targets, and the map runs north through Longs and Little River, where prices drop again. Year-round tenants keep the rent side steady.

Sourcing

Where the discounted houses come from

Bank-owned listings are the usual starting point. A bank that has taken a house back sells it for less than a fixed-up house nearby, and that discount is what the strategy runs on. By our own tracking of sales, bank-owned houses have sold about 17.34 percent under market value on average. The buyer who can close soonest usually gets the house.

The same tracking puts distressed condo units at about 22.32 percent under market, the deeper discount because condo supply is larger and many investors will not buy into a building at all. Estate sales and worn rentals coming off long tenancies make up the rest.

We hear about bank-owned and pre-listing houses early, from agents who have worked this market for decades, and our analysts screen every active listing for rent-to-price math at the same time.

Condos

Buying a distressed condo unit

Distressed condo units in stable buildings sell at deeper discounts than houses, because the supply of condos is bigger and many investors will not buy into a building at all. The discount usually comes from the owner, not the building: one mismanaged or foreclosing unit sells cheap while the building itself still passes lender tests.

A building that fails those tests is called non-warrantable. The lenders who will still refinance you there want about 25 percent down, against the 20 percent a warrantable building can take, so another 5 percent of the value stays parked in that unit instead of funding your next purchase. Figures from BrickWood Mortgage.

Our agents check the building before you offer. The full picture is on the condotel and non-warrantable condo financing guide.

The work

The rehab, the lease, and how we help

Fix what raises the value and the rent, not a wish list. Our agents walk the house with you before you offer and tell you which repairs the appraiser and the tenant will pay for, and which ones you will never get back. We introduce the contractors we use here, so the bids come from people who have done this work on the Grand Strand.

Once the work is done, a signed lease is what the refinance lender wants to see. Inland areas lease fastest. Demand there comes from workers, hospitals, schools and Coastal Carolina University, not tourists. Houses approved for the housing choice voucher program lease fastest of all, and we walk owners through what the housing authority inspects and how to get a unit approved.

One local rehab for scale: a house on Woodlawn Drive took $90,317.80 of work from a local company we recommend. A new roof, replaced rotted studs, new insulation, new cabinets, counters and backsplashes, repaired floors and walls, fresh paint, and a hot tub for short-term guests. The house was worth about $180,000 before the work and appraised at $384,000 after, and BrickWood Mortgage financed the project with no money down. Start to finish, financing included, about three months, and the buyer kept it as a short-term rental. His numbers, not a promise.

The refinance

The refinance that returns your cash

The new loan is usually a DSCR cash-out loan: the loan qualifies on the property's rent, not your tax returns. Most lenders cap the cash-out at 75 to 80 percent of the new appraised value. Many also require seasoning, meaning the lender makes you wait a few months before using the new value. Our lending partner skips seasoning for BRRRR investors here, so your cash comes back months sooner. See the DSCR loan guide for how the refinance works.

When an appraisal does come in low, and here that is rare, our agents pull their own comparable sales from the Coastal Carolinas MLS and file a reconsideration of value through the lender. In the past, one of those changed the number, and the borrower brought less cash to closing.

The repeat

Doing it again with the same money

If the after-repair value holds, most of your cash is back and the tenant covers the loan. If the house appraises under the number the deal was priced on, your cash stays stuck in it. Pricing that number is the part our agents do with you before you buy, from sold homes nearby rather than from an estimate.

Tim's grandfather owned rental property in Horry County, and Tim owns rentals here today, so the numbers Chapter3 runs for you are the numbers he runs on his own investments. Run the rent and value numbers through the long-term rental analyzer before you buy. If you would rather sell the finished house than keep it, that is a fix and flip. Read that guide to see whether it suits you better.

Another way in

The new construction version of BRRRR

The scarce ingredient is the discounted house. One way around it is to create the value instead of shopping for it. We work with a local builder whose built houses appraised for more than they cost to build, and a brand new house rents higher than a comparable older one.

The rent side gets solved during the build. We look for tenants moving to the area around the month the house will be finished, so about nine times in ten the house has a renter lined up before the work ends. The cycle is the same as BRRRR, with the discount coming from the build rather than from a distressed seller.

One house took about $260,000 of capital to build, half of it financed, and appraised at $390,000 once it was done. Those are his numbers, not a promise. This path needs a builder relationship or a real discount during construction, so it is not open to every investor. Ask us whether your numbers fit it.

Paying cash

Benefits of buying cash

A cash offer is stronger than a financed one on these houses. Bank-owned and off-market houses are the first two places our agents look, and both usually go to the buyer who can close soonest. Cash has no appraisal to fail and no loan to fall through, which is worth more to those sellers than a slightly higher price.

Cash does not have to stay in the house either. The refinance step is the same one BRRRR already runs: buy with cash, fix it, sign a lease, then take a DSCR cash-out loan and put the money back to work. Our lending partner skips the waiting period on that refinance, so the cash comes back sooner than most investors expect.

You can still buy these houses with a loan, and off-market is where it happens, because there is no competing cash offer to lose to. Our agents talk to owners before a house is listed and find out what the seller needs. Then we build the offer around it: the closing date they want, a shorter inspection window, more earnest money, or a price that pays them for waiting on your loan. A seller who has not listed yet is usually weighing one offer instead of five, and that is the situation where financing wins.

Common questions

Frequently asked questions