
If you’re part of the real estate business or plan on breaking into it, you’re probably quite familiar with the handy term “BRRRR investing.” This method has grown rapidly over the years and entails buying a distressed property that will ultimately be rehabbed, rented and refinanced and then repeating this process — like all great strategies.
The BRRRR process allows investors to build passive income over time by leveraging the real estate market to their advantage.
1. Buy
The first step of the BRRRR method is to buy a property. Buying real estate is a great way to make a return on your investment when purchasing below market value.
The key to BRRRR success is buying properties under market value and not investing more than 70% of the properties after repair value (ARV) so that you have enough equity in the property when seeking financing or selling. Part of this process is deciding how you will finance your property, such as using cash, a hard money loan, seller financing or private loans.
To calculate the ARV, here’s a tip: Have an agent or investor help give you an estimate of what the house will appraise for once it’s fixed the way you intend to. Also, consider the comparable sales in the property’s zip code.
2. Rehab/Renovate
In order to rehab correctly, there are some things you should consider. First, figure out the construction and renovation costs needed to improve the value of the property so it’s livable and functional. Second, choose the right team capable of managing the real estate project effectively, efficiently and, most importantly, within budget. (Consider a general contractor, plumber, electrician, architect, etc. )
To increase ARV, you can:
• Install brand new appliances to modernize and enhance its appearance.
• Renovate the bathroom to modernize and enhance its appearance.
• Make sure drywall isn’t damaged and/or repaint walls.
• Make sure property is in great shape for the appraisal. (Putting fresh plants in front of your home goes a long way.)
3. Rent
Rental properties are important for real estate investors, as rental income generates monthly cash flow. Also, lenders are more likely to refinance a property that’s occupied by leasing to tenants. More importantly, rental income is a great way to pay the mortgage.
4. Refinance
Take steps to identify a lender to work with once a tenant is in place, and research the exact lending requirements. At the refinancing stage of the BRRRR method, it is crucial to conduct research with depth and breadth to identify reliable lenders with favorable rates and terms.
When searching for lenders, it is critical to know whether or not the banks offer cash out or if they will only pay off debt. If they don’t offer cash out, you may want to contact a lender that does. Find out how long you have to own the property before refinancing. It is important to find a lender who will lend close to the appraised value in order for the BRRRR strategy to work. Consider a qualified versus a nonqualified mortgage.
5. Repeat
Take what you’ve learned and repeat.
If you’ve successfully conquered the BRRRR method, then you’ve bought, rehabbed, rented and refinanced a property adequately. This is when you can reflect on what you’ve learned and readjust accordingly. Combining reflection and critique, you can reimplement the BRRRR method and be more successful in the future. If it was a job well done, you can use the profit left over to reinvest it in a new property.
Source: Forbes
You May also Like this
The pandemic may have brought drastic changes to our daily lifestyle, however...
Online real estate catalogues include virtual tours of sample flats to give...
There are two main schools of thought when it comes to :...
is one of the most dynamic industries that have seen some major transitions in...
For a long time now, real estate has been seen as a cash flow-generating...
With the economy fluctuating, more investors turn to the real estate market...
During this , social unrest and an upcoming election, a lot has...
In the “real” world, has historically been seen as a viable investment....
Understanding macroeconomic risk is critical to a successful strategy. While this form...
Illiquidity premium is the excess return an investor stands to earn in...
Adapt. Innovate. Accelerate. This is the mantra for any business right now...
wholesaling is a kind of arbitrage in which a party known as a wholesaler...
Months after the onset of Covid-19, we continue to see its impact...
Prospective buyers getting their first glimpse of potential homes through smartphone cameras...
The pandemic crisis has thrown nearly all industries for a loop, and...
What do Google, Microsoft, Facebook, Twitter, Visa and American Express all have...
The COVID-19 pandemic is having a transformative impact on (CRE) markets. The...
Your current financial stability doesn’t guarantee that you’ll be free from financial...
If you’re investing in property, you’ll need accurate real estate valuations to...
While the national faces significant uncertainty right now, it's important to recognize...
A myriad of publications have already pronounced office space a trend of...
The current pandemic and global response is a once-in-a-lifetime event that has...
real estate investments will fare well in the face of the coronavirus, which...
New York, NY—With the shift towards buying an experience over buying a...
Passive income is an important factor in building wealth and achieving financial...
We've all seen studies on millennials circulating around the internet. As the...
I’m often asked what my preference is when comparing angel investing to...
Two popular avenues, real estate and bitcoin, have been making waves in...
Private real estate affords investors considerable control over their , from how...
Engaging the right attorney helps you avoid costly mistakes in deals. Especially...
The regulatory bodies in real estate include but are not restricted to the following;...
Deloitte’s 2020 Commercial Real Estate Outlook surveyed 750 owners, operators and investors in 10...
Most new investors in active real estate start with a traditional method...
Millions of Americans depend on cash flow generated by long-term investment portfolios,...
There is a common misconception that real estate investing requires property ownership....
Planners have charged the Lagos state government to do more detailed master...
The commercial real estate industry has entered a new phase of technology...
Buying a home is one of the most expensive decisions you'll ever...
Americans are spending less on home renovations than they were at this...
Are you thinking about purchasing your first piece of real estate? Investing...
Are you ready to invest in real estate? Real estate funds and real...
Real estate transactions often involve significant amounts of money. As a result,...
Investing in real estate is tremendously exciting, and can be very lucrative....
Ahmed Dangiwa, Managing Director, Federal Mortgage Bank of Nigeria (FMBN), said the...
Real estate markets trend between times of boom and bust, depending on a...
Malcolm Gladwell states that it takes 10,000 hours of practice to become...
Purchasing a home is a huge financial commitment, so finding the right...
The long-awaited overhaul of the National Urban Development Policy (NUDP) has been...
Everyone knows that retail is evolving, and common thought says that retail...
In cities, mixed-use real estate is hidden everywhere. Someone likely lives above...