An Intro to BRRRR Real Estate Investing

You know what I really like about ligers? Pick the best traits of lions and the best traits of tigers and combines them into one beast and you know something else that combines the best of two things into something totally new and totally cool? BRRRR real estate investing. You know it's the perfect cross between house flipping and rental property investing it takes the benefit of both and make something incredibly powerful that could help you build millions of dollars in net worth plus significant monthly cash flow in shorter time than you ever thought possible.

I want to give you a brief overview of how to invest in fixer-upper rental properties using this BRRRR strategy. Hang tight... So BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. It's basically the strategy where you find a nasty property and then you buy using short-term funds, fix it up pretty nice, put a great tenant in there paying top dollar, refinance it to get a nice long-term mortgage, and then repeat the process over and over.

Now, if you're confused don't be. I'm going to give you a real life scenario right now on a recent BRRRR deal that one of my clients did. The Cedar House, so he bought it for seventy thousand dollars then he used a private money lender to fund the deal and to fund most of the rehab. Now including holding costs and other expenses he spent about thirty five thousand dollars fixing up the property and man was it nice. The house rented in no time to a great tenant who paid on time every month and was super easy to work with.

Then he went to work refinancing. Now, typically a bank is going to want you to wait at least six months after getting to purchase before they'll give you the loan and sometimes they want an entire year, just be sure on that when your calculate your numbers when you're doing a BRRRR analysis.

So after the time the house appraised for close to 150,000 and he was able to get a brand new loan to pay off the short-term lender with a long-term mortgage and drop his payment by one hundred dollars a month. Now at the end of the day he kept only a few thousand dollars of his own cash in the deal and going forward with cash flowing every month. Now, besides that story why is BRRRR so cool?

Like I said it's kind of a hybrid between flipping and renting - it takes the benefits of both and reduces the risks of both, so I can build an instant equity in my property which adds to my net worth, but I can wait until the market is where I want it to be at the peak to sell.

I can also get monthly cash flow from a great tenant because great houses attract great tenants. Furthermore, my repairs and Cap Ex are reduced because the house is rehabbed already. Plus, as a BRRRR property I can take advantage of long-term capital gains tax which means I pay less taxes than a flipper might. And finally.

.. BRRRR investing allows me to buy real estate without using much of my own money, so I use a private lender to fund the deal and hopefully the repairs and I use a long-term mortgage to pay off that private lender.

Finally, BRRRR can be used with single-family houses, small multi-family, large multi-family, and even commercial properties. But, of course, BRRRR investing isn't without some risks. So what if you can't get the refinance or what if the appraisal amount doesn't come in high enough? Typically a bank wants you to know that they don't already finance the whole thing nearly seventy percent or what if you do the numbers wrong? As with any investment there are risks.

However, here's what I love about BRRRR.

You can minimize the risks by doing your homework. Now have I spoken to a local broker to make sure I can qualify for a refinance? Have I determined what the after repair value is by looking at recent sales comps other properties that have sold? And have I run the numbers properly to ensure that I'm going to have enough equity to get the loan and that all the numbers are going to work out right. Now in doing your homework you can minimize your chances of something going wrong with the refinance and furthermore I love the fact that if I couldn't get the refinance I could just sell the house and likely still make a profit.

So, I wish you the best of luck on your future BRRRR deals and your journey towards becoming a real estate mogul. If you want to learn more and you are looking for financing please contact me. I would be glad to answer all of your questions.

Contact me 714-671-8151