How does the BRRR strategy work?
In general, the BRRRR method is a real estate investment strategy that includes several different stages. Unlike a conventional real estate investment strategy, the BRRRR method involves investing in besieged properties, flipping them over, and then refinancing those distressed properties in order to buy more rental properties in turn.
If executed correctly, this method of investing can help you provide ongoing passive income. Likewise, it can also create a common way to buy and own larger and better rental properties. To successfully apply the BRRRR method, you will need to:
To buy: Purchase a beleaguered property that requires loving and loving care and work in order to be brought up to code and prepared for rental. For example: a good property for the application of the BRRRR method might be a distressed single family home that is undervalued and (although structurally sound) in need of general rehabilitation, cosmetic upgrades, and a bit of TLC. Homes that are in poor condition and have lost considerable value but have the potential to regain significant value with a DIY overhaul may be good candidates for purchase by BRRRR investors.
Detox: Then, since the property is in less than ideal condition, you will need to do any renovations necessary to increase the value of the home – noting that some homes may require more extensive repairs than others. As part of this step, you will efficiently renovate the apartment, duplex, house or condo to bring it the desired aesthetic improvements, bring its structural and safety elements up to standard and make it habitable for tenants.
To rent: After a complete overhaul of your property, you’ll want to decide on a rental price and look for tenants to move in. When looking for potential tenants, it’s important to look for people with a solid credit history, stable employment, and a solid track record. timely invoice payment recording. As a landlord, performing background and credit checks can help you in your thorough screening of potential tenants.
Refinance: Afterward, you will want to refinance the property. Simply put, this means using a cash refinance (which allows you to convert home equity into cash) to pay off the original home loan. Essentially, here you’ll take out a bigger mortgage by borrowing more money than you owe on your current loan – money that you can then use to buy another property.
Repeat: Finally, using the proceeds from your withdrawal refinance, you will then make a down payment on your next investment property and start the process all over again. In other words, the last step of the BRRRR method allows you to take the money received from refinancing from the previous step and buy another distressed property before renting it out and refinancing it again.