Also know as the BRRRR rental property strategy. A popular approach among real estate investors for building a rental property portfolio. The acronym BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. This method allows investors to leverage their initial investment to acquire multiple properties over time while minimizing out-of-pocket expenses. Here's a breakdown of each step in the BRRRR strategy:
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Buy: The first step is to purchase an undervalued or distressed property at a discount. This typically involves looking for properties that require repairs or upgrades, as these can often be acquired below market value. The goal is to find a property that, after rehabilitation, will have a higher market value and generate positive cash flow from rental income. With real estate professionals on board at Premium Property Services, we can help you identify and secure the perfect property.
Rehab: After purchasing the property, the investor will undertake necessary renovations and repairs to make the property livable and attractive to potential tenants. This step requires careful planning and budgeting to ensure that the improvements add value to the property without overcapitalizing it. Most rehabs we can tackle in-house! For speciality projects, we have the contacts to make it happen!
Rent: Once the property is rehabbed, the investor will rent it out to tenants. Ideally, the rental income should cover all property-related expenses, including mortgage payments, insurance, taxes, and maintenance, while providing positive cash flow. The investor should screen potential tenants carefully to minimize vacancy and ensure consistent rental income. At PPS, we make renting your property EASY!
Refinance: After the property is rented out and has demonstrated a stable rental income, the investor will seek to refinance the property with a new loan. The goal is to obtain a loan based on the higher appraised value of the property after the rehabilitation. This process allows the investor to extract some or all of the equity they created through the rehab process while potentially lowering their interest rate and monthly mortgage payments. We have established lenders who do this kind of thing ALL the time!
Repeat: Finally, the investor uses the funds obtained from the refinance to purchase another undervalued or distressed property and start the process again. By repeating these steps, the investor can build a rental property portfolio with minimal additional capital investment.
The BRRRR strategy is an effective way to scale a real estate investment portfolio, but it does require experience, knowledge, and skill to execute successfully. Investors need to be skilled at identifying undervalued properties, managing rehab projects, and obtaining favorable financing terms. Additionally, it is crucial to be aware of market conditions and trends to ensure that the BRRRR strategy remains viable in the current environment.
This strategy almost sounds too good to be true, but it is not. We have seen investors successfully BRRRR properties and scale their portfolio very quickly. When working with a reliable property manager it is important to have one that is savvy in every aspect of the industry. As real estate professionals, property owners, investors, and much more. We are fully in tune with ALL aspects of the real estate world and put that knowledge to work for you!
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