BRRRR method and a first time Investor

So what's BRRRR? It's an interesting term acronym made famous by Bigger Pockets, but it's actually been around for years, Buy Renovate, Rent, Refinance, Repeat.  We get lots of questions in our office from first-time investors on BRRRR and also respond to a lot of questions on Bigger Pockets.

Originally posted by @Tim- I've taken the deep dive into REI about a month and have been consumed with information ever since. I'm looking to purchase my first property within the coming months and the BRRRR strategy has really stuck out to me as a great opportunity. Only issue is, every story I've heard has been one of success and it CANNOT be just that easy. I've watched webinars and have learned about different risks but I'm trying to understand all of them and see if it's a good fit for a first time investor like myself. Is it really a matter of nailing your numbers like rehab costs, getting that correct appraisal you're looking for and having an eye for a great deal?? I've been very back and forth with financing as well as it's related to the BRRRR method and stuck whether I should be focusing on a hard money lender, which I know can be expensive depending on interest rates and possibly points, or stick with a conventional loan. I want to start reaching out to lenders but also have a solid foundation on how I would like to approach the deal financially. Any input would be greatly appreciated and I apologize for this winded post, as you all know, there's a ton of info out there to try and digest!! Thanks and I look forward to your responses

@Crystal Smith: Whether your a first time or an investor with a lot of experience I believe one of the most important things missing from your list is "cash reserves". Whether you go conventional or hard money you need cash reserves. it could be your cash or someone else's. A lender will want to know that have and are prepared to put some of your own skin in the game.  so be prepared to share your own balance sheet.

@Tim: Thanks for your input, I appreciate it. I have reserves in the bank definitely, I would like to just hold onto those reserves, at least as much as possible. I’m not opposed to putting a down payment down, whether it’s hard money or conventional, and don’t mind having skin in the game. That makes sense, I just don’t want to drain all reserves I have and put myself in a trick bag for my primary residence, I like to keep an emergency fund. I would like to be able to finance correctly to keep some reserves I have and have momentum going into the next property if that makes sense. Maybe I just need to take a step back and weather the storm of my first property and go from there without worrying so much about my second . I've also thought about doing a HELOC to help with the down payment and or the rehab costs.

@Crystal Smith: Don't give up so easily. Since you have reserves, the trick is showing it on your balance sheet, then only using it for emergencies or since the topic is BRRRR, using it to fill the gap between what you get from a lender and what you really need to complete a renovation, and then when you refinance getting all or most of your reserve back.

Simple example- Total cost for a project is $100K, the lender gives your $90K; you fill the gap with $10K of your own money. When the project is complete and you refinance you get all or a portion of your $10K back.  It doesn't always work out this way but that's the objective.

Another example:  Lender wants to see you have the $10K on your balance sheet- You show it but don't use it. This is where Real Estate gets fun- Make a deal with someone privately to borrow the $10K to fill the gap. Refinance and pay that person back.