The BRRRR (Buy, Rehab, Rent, Refinance, Repeat) Strategy: A Primer for Investors
Whether you are a homeowner or tenant, we all love the real estate investment invented by Brandon Turner that is known as the BRRRR method.
Interestingly, BiggerPockets created a calculator that further simplifies the analysis of this method.
This article will explain how property investors can use this method.
B – Buy
Without a doubt, you make your profit by buying.
According to Tolstoy, a good purchase is important for every good deal;
however, every bad deal is simply bad.
You must not forget that you will not get any exceptional feedback mechanism if you want to purchase property that you want to hold.
Although appraisal will be provided, it is easy for you to disagree with it.
Also, you never can tell if the appraisal is even correct or not.
Therefore, absurd appraisals may make house owners believe their house is worth more than its real worth.
The turnover will show you whether you gained or lost from the investment you made.
Holding properties may make you feel the appraisal is not useful. Hence, buy-and-hold property owners may not put in enough effort.
Take advantage of the BRRRR method to gather money to refinance a property so as to spend virtually nothing on the property and still reduce risk by getting 25% equity.
To have extra money to keep in the deals, holders should target about 75% of the value.
70% will be okay too.
For buying the property, consider using hard money loan, private loan, cash or seller financing.
R – Rehab
Although rehabbing a property provides lots of advantages to landlords, you should think about two important things.
The first things are the essential elements that can make the home functional and livable, and the second one is the rehab decision that offers more values.
Certain appliances and items are of advantages to the tenants, but they are not worth installing except you own a luxury property.
These things include hot tubs, bay windows, granite countertops, high-end appliances, and chandeliers.
Are the things you are considering for rehab necessary for functionality and livability?
If they are not, you do not have to waste money on any luxury items as they will not provide as much value as their cost.
However, make it a duty to create a good first impression for your property by making its front part to be appealing.
R – Rent
Typically, banks prefer refinancing properties that have occupants.
Therefore, you need to rent out your property first.
Take your time to screen your renters carefully so that you give the units to only tenants that can afford to pay their rents regularly.
If you want to make sure, that your tenants won’t let you down, let us find tenants!
Another important thing for investors is to consider is financing.
During appraisal, inform the tenant that you will be appraising the property beforehand. Written notification and a reminder will do the magic.
Although it is not necessary for the renters to be around when the appraisal is going on, it is important for the environment to be clean.
R – Refinance
Nowadays, it is easy to get refinancing options for single-family rentals from banks. Nevertheless, you need to make inquiries about a few things to avoid any pitfalls.
Foremost, you should understand whether they only pay off your existing debt or provide cash.
Also, ask them about their seasoning period.
The seasoning period refers to the duration you must have owned a property before the bank can refinance it based on the appraised value.
If you are looking for banks that refinance rental properties, get recommendations from other property investors, local real estate groups or online platforms.
After finding a suitable lender, provide quality and necessary information that can impress them and aid their decision-making.
R – Repeat
After following the steps highlighted above, repeat them to make further investment in rental properties.
Undoubtedly, the BRRRR method requires time and efforts.
However, it is a great way to build wealth from investing in rental properties.
Do you need more help?
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