Achieve Remarkable Growth: How to Acquire 17 Units in 3 Years with a Low-Risk “BRRRR” Strategy Despite High Interest Rates

These two college teammates built a sizable real estate portfolio in just three years by using what they call the “delayed BRRRR strategy.” They’ve used this specific real estate investing tactic (and the regular BRRRR strategy) to turn one duplex into more than a dozen rental properties for their portfolio. They didn’t start with a ton of money and only got into investing together in 2021 when housing competition was high, and rates were soon to rise sharply. So, how does their strategy work, and how can YOU use it to buy more rental properties?

In this episode, these innovative investors, Joe Escamilla and Sam Farman, talk about why it’s CRUCIAL to have great real estate investing partners and how choosing the right one can be the rocket fuel you need to build a financial freedom-enabling rental property portfolio. They share the new “BRRRR” strategy (buy, rehab, rent, refinance, repeat) they’re using to get steady real estate cash flow AND boost their equity at the same time.

We’ll also talk about raising private capital and creating your own real estate syndication so you can buy more real estate using other people’s money and pass along the returns to your investors. Joe and Sam have built a real estate portfolio most investors can only dream of achieving, and they did it all in only three years, during high rates, and while working full-time jobs. Stick around to hear how you can do it, too!

Click here to listen on Apple Podcasts.

Ashley:
Welcome to the Real Estate Rookie podcast. I’m Ashley Kehr, and if you’ve been listening recently, you know that we’ve had an addition to the BiggerPockets family. Tony and his wife just welcomed a baby girl into the world. So to give Tony some extra time with his family, we’re bringing you an episode from the BiggerPockets Real Estate Podcast. In this episode, we’ll hear from Joe and Sam and how they’ve used a new BR strategy to scale their portfolio even during this high interest rate time. And we’re going to go over how they’ve been able to leverage their partnership as a superpower in building the real estate business.

Dave:
Sam and Joe, welcome to the BiggerPockets podcast. Thanks for joining us today.

Sam:
Thank you so much for having us. It’s an honor we’re both longtime listeners and we’re so excited to chat with you today. Thank you, Dave.

Dave:
Well, great. I’m eager to hear your story and hopefully how BiggerPockets has helped that if you’ve been a long time listener. So Sam, maybe you could just give us a little background. You and Joe are both joining us today. How did you guys first meet and get into real estate?

Sam:
Joe and I met in college playing college soccer together, and we’ve been friends for a very long time, even long before we were business partners, we actually interned together at the mortgage company that Joe still currently works at today. Upon graduating college, Joe’s one year older than I am, we were both looking into ways to generate passive income and Joe working for the mortgage company did have his hand in real estate, and I was working for a property management company at the time, so I had my hand in real estate as well, and we actually stumbled on BiggerPockets and started listening to every podcast you guys put out reading every book. I mean, I’m looking at my bookshelf above my head with all your guys’ books from A to Z,

Dave:
You guys go to Hobart and William Smith, you’re playing soccer together. And then Joe, it sounds like you graduated a year earlier. It sounds like you moved home to Long Island, is that right?

Joe:
I moved back home. I immediately became licensed as a loan officer and was doing that and still doing that to this day. And Sam, obviously I stayed in contact with him. He was in his senior year, and we just kept bouncing ideas off each other like this real estate thing. We keep hearing about it, we know that it’s possible for us to become financially free, how do we get into it? How do we partner up together? And we’re kind of just trying to figure out how we can get our foot in the door and how we could do it together.

Dave:
Why did you become a loan officer?

Joe:
I kind of fell into it where I met an alumni from my school, which highly recommend trying to get a mentor and somebody that can teach you the ways of real estate and kind of teach you the ways of whatever industry you want to get into. I interned with them for a couple of years. I realized that it was something that I liked doing. I liked speaking to people, I helping people along the home purchasing process and refinancing and things like that. So I actually got licensed before I went back for my senior year

Dave:
Because

Joe:
I knew that’s what I wanted to do, and I knew that once I graduated from school, I didn’t wanted to study for anything ever again. So I was like, let me study for this, let me pass it, and then before I go back for my senior year, then I’ll be ready to go.

Dave:
Man, you were way more responsible before your senior year of college than I was, is not what I was thinking about. Okay. And Joe, what year was this?

Joe:
This was 2017 when I originally got licensed. Then I graduated 2018.

Dave:
Let’s talk about deals. When you guys partnered up form this partnership, what was the goal you were trying to achieve? What kind of portfolio were you envisioning?

Joe:
So we kind of set our sights on let’s do a long-term rental. Let’s buy a property, fix it up, get some tenants in there. Before we actually did our first deal together, I did a primary residence live and flip, and Sam did his own rental property, single family investment before we did our first deal together, which was a duplex.

Dave:
Oh, cool. And so just so I have the timeline straight, we both do sort of a residential move and then what was the first deal you did together as partners?

Sam:
So the first deal we did was a purchase in Scranton, Pennsylvania where we still invest today. We did a duplex burr where Joe, myself and Joe’s fiance actually drove down and did some of the work ourselves, partially to save costs of course, and partially for fun. And we renovated the kitchens on both sides of the duplex, had a contractor redo flooring, did some really nice epoxy countertops that we had. We found a DIY kit to do.

Dave:
Oh, nice.

Sam:
And we actually did a really nice job. There’s some great before and after photos that we have of that duplex that we renovated and that we were able to actually rent it out for at the time, top rent for a three bed, one bath on each side and start generating some decent cashflow. And of course that was in April of 2021. We were working with a pretty solid interest rate at the time, and that’s when, of course the real estate market was really heating up.

Dave:
Well, first of all, why Scranton? Because neither of you lived there, you didn’t go to school there. What attracted you to the area?

Joe:
Yeah, so I think Sam was the one that originally found the Scranton area. The reason we landed there was because we both lived in very expensive areas. The whole New York tri-state area, even Connecticut and New Jersey is just so expensive and the taxes are very high. Not to say that you can’t make money in that market, but it might be a little bit tougher or you might need more capital to put a 20% down or a 25% down payment if you can’t go a low down payment option. So we thought to ourselves, if we can go into a market that is not too far from us, where if there’s an emergency we can drive out there and be there in three hours, and also saving up that 20, 25% down payment that a lot of investor loans require, then we could do more deals at a faster rate.Whereas in New York, if we wanted to save up 25% of a six, seven, $800,000 house, it’s going to take much longer obviously than this duplex that we bought at, I think it was like one 20 or one 40 range. That was the first part of looking for just a new market that we can make our money go faster, the velocity of our money, turn it over quicker. Then from there, as we found that area, we realized that it had a strong price to rent ratio where the ratio of the rents that you can get on a property is relatively high compared to the actual price of the property. So that ended up allowing us to find more properties that cash flowed.

Dave:
Right, and I mean that all makes a lot of sense. I think finding markets that just work for your lifestyle is the number one thing. Most people don’t just look at the entire United States and say, I’m just going to throw a dart or just pick the most optimized place. But you had clear criteria about what supported your lifestyle, what supported your strategy, and went out and found it. All right. It’s time for a break. We’ll be back with more of this week’s investor story in a few moments. During this time, Joe 2021, obviously the market was heating up, but it was also super competitive. So was it hard to find deals because at least in a lot of the markets I operate in or that I was studying, you were making these offers sight unseen, you were waving contingencies. Is that what it was like in Scranton?

Joe:
Yeah, we really had to kind of be patient because it was so competitive. I think we made offers on five or six properties before we closed on our first one, and we were getting into bidding wars with other investors, other buyers that were looking at the same properties we were. So we kind of had to be a little bit creative and we didn’t waive inspections just because again, we were newer investors and we knew that you know what, we’re not handy enough. We’re not contractors, we’re not going to completely waive an inspection, but we’ll do it for informational purposes only, for example. So let us get an inspection. We will not nickel and dime you over every little thing, but we just want to make sure that what we’re buying is not a lemon. It’s not something that’s going to crumble on us in the first couple of years.

Dave:
Yeah, that’s a good tip. I’ve done that even still since the pandemic. If you want to be competitive in an offer doing, I call it like a yes no inspection where it’s just like you get the option to bail out or you buy the property as is, and sellers usually typically really like that kind of thing and will allow you to stand out even if you’re price point is similar or even less than some of the other offers. So that’s a great tip. So this deal, it sounds like it went really well. Can I just ask, Sam, what’d you buy it for and do you still own it or what’s the deal with it right now?

Sam:
So if I remember correctly, we purchased it for 127,500.

Dave:
That’s very specific. I think you remember.

Sam:
Yeah, if I remember correctly. I need remembers exactly. I can’t remember. Anyway, and from there we put about 30 K into it and we refinanced at 180 8. I think from there we held it for about two years. It was cash flowing after that refinance. We did a very nice job on the renovation between the three of us going down there and then our contractor that we met through that deal. We then held it for two and a half years and then actually sold it at two 50 and 10 31 exchanged it into a four unit that we still have

Dave:
Today. Oh wow. That’s awesome. So is that what you did right after you basically did a refi out and then used that to build the portfolio more?

Sam:
Exactly. So like any BiggerPockets podcast listener, we became absolutely obsessed with the BUR method. The concept of recycling your money from one deal to the next really spoke to us and we refinanced at 188,000 and then took our cash out and used it to buy a triplex in the same area, which we still own today. And we actually took a hard money loan out to do the rehab on that triplex, whereas in the first one, we financed it ourselves.

Dave:
Great. And yeah, this was a great time to do the bur method in 2021. Made a lot of sense. If you’re not familiar, Burr stands for buy, rehab, rent, refinance, and repeat, and it’s just a really great strategy if you want to do value add investing where you buy something that’s really not up to its highest and best use. It sounds like you guys bought a duplex those in decent shape but needed 30 grand of work. You put in the work, you increase the value of that property and then you can refinance some of the equity or hopefully in the best situation, all of that equity out of the deal, you get to hold onto your property and you get to use that money elsewhere,