If you’re getting into the world of real estate investing, chances are that you’ve heard the term “BRRRR Strategy” or “BRRRR Method.” For many, this strategy has proven to be the key to finding incredible success in the real estate investing space. So what is the BRRRR strategy and how do you employ it?
What Is The BRRRR Strategy
BRRRR is an acronym whose letters mean Buy, Rehab, Rent, Refinance, Repeat. From there, it’s pretty self-explanatory. However, there are subtle tips to each step in this process that will help you to become a success in real estate investing.
When it comes to buying, most real estate investors can give you tips until they’re blue in the face. However, through my experience, I’ve found that the most important things to think about are:
- Price – Getting a good price sets the stage for a strong potential to profit. So, when buying, make sure that the price is right.
- Location – Often times, we overlook location. However, if you’re buying a rental property, commercial property, or even a home, location is going to be important. Think about it… isn’t it going to be easier to rent a house that’s central to grocery stores and entertainment?
- Repairs – Buying a fixer upper can be a great move. However, make sure that you look at the cost of the repairs that will need to be done and compare the total that you will be paying in the price of the property and the necessary repairs before making your financial decision as some repairs can become quite costly.
Once you’ve purchased your real estate, it’s time to rehab. This is the process of increasing property value through making changes. Little things like new flooring and painting walls can greatly enhance the appeal of a property. Here are some factors to consider when it’s time to rehab:
- Risk v. Reward – Every time you change something on your investment property, it’s going to cost money. Consider the amount of money it will cost compared to the improvement that will be made to the overall value of the property when making cosmetic changes.
- High End v. Low End – Making high end changes using high end materials can be quite expensive. However, in some areas with high end audiences, it’s a must. Consider the community preferences when making changes to an investment property.
- Don’t Paint The Pig – If something is wrong, fix it right the first time. It’s never a good idea to paint over mold or install shingles over rotted plywood. Save money in the long run by spending what it takes to do it right the first time.
Once you’ve put the property through rehab, it will likely be worth quite a bit more money. This gives you the opportunity to refinance the home, often times, getting a better interest rate. Some investors use equity built in the home through the remodel as a down payment to expand their portfolios. Here are some tips to consider:
- Don’t Jump At The First Deal – As with just about anything, it’s always a good idea to shop around when refinancing an investment property.
- Read The Fine Print – We’re talking about lenders here. At the end of the day, they are in the game for profit and that profit comes from you. Always make sure to read the fine print and know exactly what you’ll be paying before signing on the dotted line.
- Read Reviews – We live in the age of the internet. Any reputable lender will have plenty of reviews for you to comb through. Get an idea of how the lender has treated other customers by reading reviews online.
The repeat step is the easiest, yet the hardest one. When you’ve made a few bucks in the market, chances are that you’re going to want to spend it. My tip here is simple, don’t let your real estate investing life die here. Take the profits that you’ve earned and put them into a new property, allowing your money to grow even more!
If you’re considering investing in real estate or are just getting started, I urge you, don’t look past the BRRRR strategy. This strategy has helped countless investors expand their portfolios, and therefore their earnings. It will likely do the same for you!