What Is The BRRRR-Method for Real Estate Investment?
If you are investing in real estate, it is highly likely that you have encountered “BRRRR” at some point in time. But what does it actually stand for, and why are so many real estate investment practitioners and experts always talking about it? Let’s find out.
The acronym, BRRRR, literally stands for Buy, Rehab, Rent, Refinance, Repeat. It is also commonly known as “The Smart Investor’s Investment Cycle”.
BRRRR is actually not the common method of buying a property and earning from it. It is not the easiest route of investment, but it definitely is one of the most profitable investment methods for real estate. With this method, you can buy homes quicker, rehabilitate or refurbish it for added value, generate and build cash flow by renting it out, refinance it to gain a higher financial position, and do it all again. It is an investment cycle that will surely reap its benefits every single time.
Though it seems pretty straightforward, there are a few things that you must know before applying the BRRRR method to your real estate investments. Here are some key items for each method:
- Buy
Do not overpay on a property and ensure that you keep in mind some additional charges when you refinance that property later on. Refinancing usually has additional charges that you should shoulder such as appraisals and title work. To put it simply, you can opt to buy a property when it is priced (or can be acquired) under the current market value. The safest amount that you can shell out in buying a property would be 70% of its current market value.
- Rehab
Unless you plan on holding properties for luxury rentals, rehabbing a property does not need to be an elaborate process. Items such as chandeliers, bay windows, or even skylights are non-essentials—quite unnecessary. However, you can gain added value in rehabbing kitchens, roofs, walls, bathrooms, and bedrooms.
- Rent
Prioritize finding a tenant to rent your property before asking for an appraisal for refinance. It is common practice to ensure the appraiser determines the value of your property.
- Refinance
The main trick in refinancing is to find the best value for your appraisal. This means that you need find the right bank that will give you the best offer for your property.
- Repeat
There is no special advice in this part of the method as it is the most fun and rewarding part. But what you can do is to take all key parts that you have done in the past, learn from it, use it, and enjoy your success.
Now that you are aware of the BRRRR method, you’re ready to try it out on your real estate investment practices. Still have more questions? Let’s discuss them!
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