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If you have ever listened to podcasts or interviews with successful real estate investors, you have likely heard them talk about the BRRRR real estate strategy.
However, since this common shorthand for the investment strategy has become so popular, it is easy to hear about it without being told what BRRRR is supposed to mean and how to follow this method correctly.
So, look at BRRRR investing and how it became one of the most reliable and trusted methods of building and scaling a real estate investment portfolio in 2023.
But first, before you dive into the BRRRR method or any other investment strategy, do yourself a favour and connect with a well-connected mortgage brokerage that can help you finance your plans. To help you start, click the link below for a free strategy call today.
What is the BRRRR Method? Why Do Investors Trust This Strategy?
The BRRRR Method – Buy, Renovate, Rent, Refinance, Repeat – is a strategy investors use to approach rental property investing by following a specific process as they acquire new properties.
However, to fully demonstrate why investors trust this method, let’s break it down step by step.
The BRRRR Strategy – Step-By-Step Breakdown
The first step of the BRRRR method is relatively simple: buy a property you want to invest in.
However, there is one thing you need to keep in mind when buying your investment property. You need to buy a property with room for improvement to raise its value through updates and renovations. Ensure you are not purchasing a property that is too distressed or over-valued despite its conditions, or the method won’t work.
Once you have acquired the property you wish to invest in, it is time to start renovating. Look at the areas around the property that visibly need improvement and tackle each job as quickly, professionally and affordably as possible. You want to spend only a little bit of time on renovations because, on top of your renovation expenses, you still have property expenses to cover. Likewise, you want to spend only a little time on renovations that do not add value to the property.
However, that does not mean you should cut any corners. Take as much time as you need to do the job right; try to manage your time efficiently.
The next step of the BRRRR method is to start renting the property out. Not only will this bring in the rental income and cash flow you wanted from the property, but in many cases, it is necessary to have a tenant living on the property to complete the next step.
Likely one of the most critical steps, once you have a tenant in place, it is time to refinance the property.
When you go to refinance the property, you hope to draw out the sweat equity you have earned by renovating the property and making critical improvements to the home.
So, the success of this step relies majorly on whether or not you bought a property with enough room for rapid appreciation and if your renovations were valuable enough.
Also, many lenders will not refinance a vacant property. Therefore, you must find a tenant before trying to refinance.
Finally, sometimes you may need to wait a few months to refinance as specific lenders will only refinance a property after a certain period has passed since you purchased the property.
Once you have drawn out equity from your first investment, you can use those funds to invest in new properties and more. Eventually, once you have built an extensive enough portfolio, you can start refinancing multiple properties at a time to make larger and larger investments – or you can buy various rental properties at once.
If You Are Ready to Invest
If you are ready to try out the BRRRR strategy for yourself or another investment strategy, get started on the right foot by talking to a mortgage broker who can help you find the best available rates for each step of your process.
To start with us today, click the link below for a free strategy call with our team at LendCity.