- In this video we're gonna discuss the BRRRR method
and using entities.
All right, guys, let's get started.
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Okay, so the BRRRR method, what is that?
I'm sure many of you know what I'm talking about.
That's what intrigued you into clicking on this video,
but it stands for buy, rehab, rent, refinance, and repeat.
Lot of R's inside of there.
Now, when it comes to using entities, what does this mean?
Because if you've watch many of my other videos,
we talk about putting properties
in limited liability companies or land trusts
or maybe even a corporation,
or in a self-directed retirement account.
How does the BRRRR method fit into all of that?
Well, in that particular case,
entities are gonna take a back seat
to that method and here's why.
Let me just show you what happens with the lifecycle
on those types of properties.
So you buy your property right here
and then you come over here to your property
and you bring out your hammer and you start fixing it up.
So now you've rehabbed the property.
Great. So now we've got this property rehabbed.
Then we go out there and we advertise it
and we end up renting the property
to these individuals right here.
And they come in and move into our house
and now it's a rental.
So at this point in time, if you watched my other videos,
I will tell you, all right,
if you have rental property, you wanna protect it
because who knows what's gonna happen
when those people move into the house?
Somebody gets hurt on the property,
you're gonna get sued
because you're the owner of the property.
So you want asset protection.
So here's what you decide to do.
You call me up and you say, "Hey, Clint.
I need to get a limited liability company set up."
So we set up this LLC to protect the property.
But remember, with the BRRRR method
there's a couple of R's there.
We've already done the buy. Okay, so we did that.
We've done the rehab, taken care of that.
We've done the rent. We've taken care of that.
Now we need to do the refinance portion of this deal.
And so what happens here is if you jump in
and throw a limited liability company around this property
before you've done the refi, you're gonna run into
some problems here on this type of transaction
because most your brokers that you're gonna work with,
if you're trying to refi your property,
if this is single-family
they're gonna want it in your own name.
So you've got a problem cause it's
in a limited liability company.
And if your broker is gonna write
a Freddie, Fannie conforming loan, this isn't happening.
It doesn't qualify for that type of loan.
This would probably qualify if you're gonna go
to a local community lender and refinance the property
and they're gonna treat it as a portfolio loan.
You could probably jump in here
and put the LLC around your property.
But if you're going to a broker, hey man,
you just blew it, game over.
There's no third R here in this deal.
Your money is gonna be trapped there, unless you do this:
You go over here,
you pull the property back out into your name.
Then you approach the lender to do a refi.
Now, when they run title, what are they gonna find?
They're gonna see that you bought the house
from this investor here.
Okay? You bought it in your own name, actually.
So there's one deed. Here's two deeds, there's three deeds.
So within a period of,
let's say it took you three months to do this,
there's been three property transfers.
Now you got another issue you're gonna probably have to deal
with in working with your lender,
is that property being churned?
So you wanna make sure you're getting the maximum value
for that property so you can pull out as much money
as possible to go back and do that fourth R there, repeat,
but when a lender or broker looks at this
and they're gonna say, "Wait a minute,
this property's been bouncing around.
I don't know what the true value may be on this,"
since they get skittish.
So here's what I'm gonna tell you,
when you're using the BRRRR method
and you're setting all this up,
get done with the BRRRR before you start focusing
on the entities, because that critical step here,
the third R, where you need your cash out of the deal,
you don't want to screw that up by using a business entity
ahead of time to encapsulate the property.
So you get it done after you've done the rehab,
I mean the refinance, the money's back in your name,
in your pocket, then go back and slip the LLC around it.
Now, before you start wondering, "Well, Clint
what about the due-on-sale clause?
They're gonna accelerate my note."
Don't worry. I got you covered.
I got another video on that as well that talks
about the due-on-sale clause
and you'll understand it's not an issue.
So wait to do your limited liability company
until you're done with step 3, or the R,
the third R in your transaction
before you try to protect your property.
All right, guys.
Hey, be sure to check out my other videos on LLCs,
using them for asset protection.
And if you're not a subscriber,
be sure to click on that subscriber link right now
and subscribe to the channel and here's why.
I get a lot of questions from people who view the channel,
asking me, "Well, Clint,
what about the Corporate Transparency Act that passed
in front of Congress?
Or what about using solo 401ks?"
And I always have to go and find the links for them.
Whereas if you were just a subscriber,
every time I post a new video
you would get notified of that.
So you'd be up-to-date with the latest techniques
and strategies we're using to protect our real estate.
All right. Take care, everyone.
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