One of the more popular real estate investment strategies is the BRRRR strategy. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. This process involves purchasing a property in need of rehab at below market value, rehabbing it, refinancing into a long-term loan, renting it to tenants and using the cash-flow to repeat the process.
In this article we’ll explore each phase of a BRRRR project and highlight why this strategy has worked for so many real estate investors of all experience levels.
Let’s dive in!
The first step to successfully execute the BRRRR strategy is to find and purchase a property. It’s best to find a property with opportunities to add value. A lot of the money on an investment project is made on the initial purchase, so don’t be afraid to negotiate the asking price.
Common strategies for finding properties in need of rehab include the MLS, wholesalers, auction and foreclosure sales, and networking with real estate agents who have access to Pre-MLS properties.
Once the right property is located, investors can utilize a hard money lender to provide the financing needed to complete the purchase and move on to the next step of the process.
Like any bridge project, the BRRRR strategy requires rehab to improve the value of the property. The property’s condition determines the necessary size and scope of the rehab budget. Once the rehab budget is accurately calculated, the next phase of the rehab can begin.
Whether an investor chooses to do the work themselves or outsource to a contractor, the next phase of a rehab starts with the actual renovation of the property. Depending on the condition, the rehab can range from simple cosmetic upgrades, or a full-scale rehab may be necessary.
Now that the loan has been refinanced from a short-term, bridge loan into either a short-term (i.e. Vacation rental, AirBnB, VRBO) or long-term rental loan, it’s time to create cash-flowing, passive rental income. Investors can look to find qualified tenants through property managers, online listings, or through their own network connections.
Once the right tenant(s) is found, the cash-flow will begin to come in with each monthly payment. In a previous article, we highlighted cap rate as one of the measures used to determine the success of an investment rental property, which takes into consideration the value of the property and the gross annual rental income.
Where the BRRRR strategy differs from a traditional fix-and-flip, instead of selling the property after the rehab is complete investors will refinance into either a short-term or long-term rental loan. Typically done as a cash-out refinance, the investor is able to obtain the equity created from the increased market value and then bridge into a new long-term loan.
This allows for investors to hold the property and continue to profit from cash-flow and appreciation.
Just like with the purchase and rehab, investors can utilize the same lender, like Easy Street Capital, for the rental loan to ensure a smooth, streamlined, and faster transaction.
The final step of the BRRRR strategy is to repeat the process. Take the profits from the initial project and reinvest them into a second, third and fourth home. Not only are investors able to obtain the profits, but they are able to use the same equity down payment on future repeat purchases, leaving no equity in the original property.
For investors looking to complete a BRRRR project, the EasyRent program offers competitive rates and allows for 75% LTV/loan amount to equal 100% of basis within 3-6 months of holding the property.
As the process is repeated, it will become more refined and profitable. This will allow investors to scale their real estate investing business and add properties to their portfolio enabling them to take advantage of the passive income that cash-flowing real estate provides.
The Wrap Up
What makes the BRRRR strategy so popular amongst real estate investors is it offers a unique blend of investing strategies. Investors are able to increase a property’s value, take advantage of that new equity with a cash-out refinance and then continue to make money off the property through rental cash-flow and market appreciation.
This is an especially attractive option for new real estate investors who are looking for a manageable way to scale a real estate investing business without having to have access to a large amount of capital.
If this sounds like the perfect strategy for you, feel free to contact us and speak with a member of our team. Our team specializes in strategies just like the BRRRR and can help guide you through a successful investment project.
About Easy Street Capital
Easy Street Capital is a relationship-based investment real estate lender with loan programs for every borrower. Whether you are buying a property to fix up, building new construction, or generating cash flow from rental units, Easy Street Capital has the solution.
As a fully discretionary lender we have the ability to customize a loan specifically to meet your individual needs. We look forward to assisting you with your next project.
Contact us today to get started on your next real estate project!
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