The BRRRR real estate investment strategy

The BRRRR strategy has been tried and tested by many people before, but I have just recently come to learn about it myself. I am stoked about the process and even more excited to tell you all about it, because it is a great way to scale a real estate investing business. It is a buy and hold strategy, and the idea behind it is to buy a property at a low price, improve the property with renovations, refinance the property and take out the equity, rent the property with positive cash flow, and repeat the process with the equity that you pulled out of the property.

B= Buy

The most important step in the BRRRR real estate investment strategy. You need to find a property that you can get for under market value. It will really help to have an established team that you can rely on to help you determine the ARV (After Repaired Value) of the property you are thinking will work for this strategy. If there is enough equity in the property, then you should be able to refinance it in the end, and actually pull out the money you put down on this property. Then you can take that money, and reinvest it again, and again. Pretty awesome!

Example: Buy a property for $60,000, but you think the ARV will be $180,000 when you rehab the property.

R= Rehab

This part is important to have a reliable contractor that will help you determine the costs before closing to repair anything in the house that needs it. Your goal here is to bring the property up to market value, and have it appraise for your projected price, or your ARV. After walking through the property, you should be able to instantly notice things that will bring up the property value. Some examples are, easily adding an additional bathroom, or bedroom, or repairing/replacing the windows, plumbing, floors and kitchen. Each property is unique, but those are just a few examples that will really improve the houses worth.

It’s important to be conservative when calculating your rehab costs so you don’t run in to problems with spending additional money to bring the property value up.

R= Refinance

After you repair the property, have an appraiser come in and determine the ARV, or the after repaired value of your property. If it appraises at what you projected before purchasing the property, then you are then able to pull out 70%-75% of that appraised value on that property. If you calculated correctly, you should be able to pull out your initial capital that you put in to the property and you can use it to put down on the next property.

Example: Buy a property for $60,000, and it appraises for $180,000. The bank will loan you $126,000 (70% of 180,000= 126,000). You can have your $60,000 and I raise you $66,000 in equity. Boom!

R= Rent

The goal for the BRRRR is to be able to hold the property for a long period of time, after you’ve taken out your equity. You are creating long term wealth, and adding up the properties in the meantime. You will be looking for a renter at this time, so that the renter can come in and pay for your mortgage on this investment property. If you set up a 30 year mortgage, depending on how you much you are paying in principal, you are essentially letting someone else pay off your mortgage, and you will get to keep that equity in the property in the end.

R= Repeat

If all of these steps have gone as planned, you should be able to repeat this process again and again, adding equity to your portfolio with each one. You are creating sustainable wealth for yourself, one property at a time. Now that you have your $60,000 plus $66,000 you can look for another property and put $66,000 down on it, and hope the ARV is $190,000. Awesome, right!?