Even seasoned real estate investors and project managers should examine their investment strategies – evolving your business model over time is a necessary step in building successful projects. Amongst the most sustainable real estate investment strategies are the “Fix and Flip” model and the “BRRRR” method. While both strategies are sustainable for real estate investors, many people only know about the strategy which they currently utilize, so let’s compare and contrast Fix and Flip and BRRRR! You might just be inspired to change things up.
What is the BRRRR Method?
BRRRR; Buy, Rehab, Rent, Refinance, Repeat – One of the earliest “modern” real estate investment methods. Having retained popularity through the last handful of decades, the BRRRR method provides stable income for developers seeking to minimize the stress of their debts throughout a project’s lifetime. The BRRRR approach to investment may feel like an expansion of “Fix and Flip”, but the overall impact and scope of work required to successfully maintain a BRRRR method project will feel much different to both you and your wallet. By not only renovating, but renting and refinancing your purchased property, you will be required to stretch the length of your direct investments much longer than in Fix and Flip scenarios. This lengthened investment period generates passive income and provides for separate projects to prop each other up financially due to the potential to easily overlap project timeframes. You can be renting out three properties while buying another, using the extra funds regularly generated by those rented properties.
What is Fix and Flip?
Fix and Flip – Sometimes referred to as “house flipping”, or “rehabbing”, the Fix and Flip method to real estate investment is best described as short-term. While, like the BRRRR method, you still need to buy and rehab, the rent, refinance, and even repeat steps are all forgone in the Fix and Flip model. This short-term investment strategy is designed for investors who want to get in and get out – you can invest in a property, spruce it up, and sell it at an immediately higher price in order to completely disengage your responsibility to said property. Fix and Flipping is for investors looking to turn an immediate profit in order to fuel their next project without needing to maintain a cash flow in order to accomplish that goal.
How Do I Choose Which Real Estate Investment Strategy Is Best?
Which is better? Unfortunately, there is no single answer. Many investors prefer the BRRRR method to Fix and Flipping because it allows them a degree of failsaving thanks to the passive income generated by previous projects, but many other investors prefer to Fix and Flip because of the focus on generating immediate profits in order to move on to the next opportunity. There is an opportunity in both for unfavorable market opportunities, whether in the rental or resale markets, so no matter which you choose to pursue, be prepared for the volatility of the real estate market. Essentially, Fix and Flipping is a short-term strategy and the BRRRR method is long-term.
Long story short, both the Fix and Flip and BRRRR methods have proven track records when utilized by the right type of investor; understanding your goals and intentions which each project will help you determine which feels the most correct for you. No matter what your preferred strategy, EMCAP Lending is here to help. Our team of experts are here and eager to help you fund your next project! To see how we can help you in your real estate pursuits, contact us today.