There are plenty of methods you can use as a basis of your real estate investment strategy – many of which all but guarantee results so long as you have your goals well established. Few models for real estate investment generate success of the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method. While the principal may seem simple at first glance, real estate investors know that no matter how foolproof a strategy is, understanding and finesse are critical to a successful project. Let’s take a look at what the BRRRR method really is and how you can utilize it to maximize your efficiency and project success.
So BRRRR sounds simple, huh?
BRRRR tells you all you need to know to pique your interest, but what kind of work goes into each step of the process can be surprising if you’re not prepared. While the BRRRR method does provide an excellent exoskeleton for your investing plans, each step will require its own internal plan:
Buying seems like the most obvious portion of any real estate investment plan, but often comes with the most unforeseen obstacles. Purchasing your property for the BRRRR method should always start with a few key considerations. Size, scope, and after-repair value of the property all help you determine if a given property is a good fit for your investment needs. This is also the phase of the project where you wager what kind of money you’ll need to invest before continuing your BRRRR plan. Chances are good that you will need a loan in order to secure a prospective property, so consider your options carefully before committing to a loan package.
Rehab also provides a multitude of potentially unforeseen obstacles. After you’ve secured your property via buying, the rehab process also comes with heavy considerations towards your budget and financial standings. The rehab step incorporates your labor, the work of contractors, and the cost of materials in order to improve your newly purchased property fo the rental market
Rent takes a basic “fix and flip” method and adds an “extra” step – becoming a landlord to the property which you just purchased and rehabbed. The renting process can be done by yourself as an individual or through a management company. The addition of renting to a usual “fix and flip” provides for a major opportunity to increase your ROI on a property as rental income is largely considered passive thanks to the lack of need for maintenance on a recently spruced up property. Research area rental prices, set yours accordingly, and enjoy the income generated to help catch up your loans.
Refinancing is vital to the success of the BRRRR model – designed to minimize the loss to your ROI, refinancing is the step of taking your private or hard money loan and getting it restructured by a bank or other long-term lender in order to lower your interest rate and increase the length of your repayment terms. While this step requires no monetary investment, it can take mental stamina to negotiate new terms with the long-term provider.
Repeat is the best part. What’s better than getting your previous project restructured, the unit or units filled with renters, and moving on to your next investment opportunity? Each BRRRR-led project teaches you something new. The repeat step is sometimes taken to mean reflect before moving to your next investment project – take a moment to consider what you learned and how to make the next project even more successful.
The real estate market is so hot it should make you say “BRRRR” – if you’re looking for your next project and need some help arranging your buy step, let the experts at EMCAP Lending help. Beyond offering loan packages without prepayment penalties, our loan officers look forward to helping consult the health of your investment opportunity. To learn more about how EMCAP Lending can help you succeed with the BRRRR method, contact us today.