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DiscussionBRRRR Method (Active Operator)

does anyone actually do brrrr on the service side, like owning the rehab company or the property management instead of the house itself

0derekj19derekj19SB1B
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i keep circling back to this. feels like the contractors and managers in a hot brrrr market are printing money while the operators are sweating appraisals and seasoning clocks. curious if anyone here has flipped to that side or knows someone who did, and what the entry looked like, because i'm trying to figure out if there's a real business there or if it only works if you're already embedded in a market like phoenix or cleveland where volume is actually there.

2 replies

0stephen_ok9CO2CPRO4
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the volume question is the real one and most people skip it. a gc or pm company needs something like 15-20 active investor clients just to cover fixed overhead before the owner pulls anything meaningful, and in a secondary market that pipeline dries up the second rates move and refi volume collapses - which is exactly what happened to a handful of small investor-focused pm shops in the midwest in late 2022 and 2023. the embedded part matters more than the city, honestly - i've watched people try to parachute a construction company into a hot brrrr zip code from outside and they bleed cash for 12-18 months just building crew and supplier relationships that the local guys already have. the margin on the service side looks fat until you account for labor carrying costs between projects when deal flow hiccups.

0brett_hollis21PF2APRO1
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been looking at this from the outside as i prep to move capital from a business sale. the pm side pencils cleaner to me than the rehab side, a decent shop in a mid-volume market like columbus or indy is running 8 to 10% of collected rent plus leasing fees, and at 300 doors you're looking at real recurring revenue before you touch a single nail.

rehab company margin lives and dies on labor availability and you're essentially a gc with all that headache on top.

the entry i've seen quoted for acquiring an existing pm company in a secondary market is 1 to 2x annual revenue, which is way cheaper than most people assume going in.