The BRRRR (Buy, Rehab, Rent, Refinance, Repeat) Method is a real estate investment strategy that involves flipping distressed property, renting it out, and then cash-out refinancing it in order to fund further rental property investment.
The BRRRR Method allows you to use investments more efficiently. If you have friends or relatives keen on investing or have business relationships and acquaintances who are investors, these deals are some of the most lucrative investments. Investing in someone using the BRRRR method allows a quick property buy with little cash down. If done right, BRRRR can put passive income in your pocket as soon as 45 days after closing on the property. Furthermore, BRRRR has a powerful portfolio effect and combined with a few others can create positive cash flow from the equity that BRRRR investments provide.
How The BRRRR Method Works
Buy a property: Purchase a “fixer-upper” or distressed property that needs work to be up to code, and in style for today’s renter. The condition of the home should make it a cheaper purchase.
Rehab the property: This step is the renovation. You’ll work with an experienced team, or DIY if you are in the industry to make safety, structural and aesthetic changes and updates to prepare for renters. It may require extensive work.
Rent out the property: Do your research to find out the correct rental price based on location, size, the updates you’ve made etc. Then you can find a renter for your property. (See our blog about becoming a landlord)
Do a cash-out refinance on the property: With a cash-out refinance, you convert your equity into cash. You access your equity by taking out a bigger mortgage, borrowing more money than you currently owe. The cash can be used for anything, including purchasing another property.
Use funds from refinance to buy another property: The final step is doing it all over again. The end of the BRRRR method is that it’s just begun! In order to keep making money for yourself and your investors, you’ll purchase another property that needs updating and rehab it, continue to find renters, and refinance again.
If you would like to learn more about BRRRR and how it can help you make more money in Real Estate contact CapSource today.