Posted in: BRRRR

BRRRR – The Smart Investors Investment Cycle

Have you heard the acronym BRRRR? You may have heard this from someone when talking about land and property. In the world of real estate, you will likely encounter this word countless times, especially if you’re planning to get an education in real estate investing. Buy, rehab, rent, refinance, repeat, or BRRRR for short, is sometimes called the smart investor’s investment cycle. This is a common and conventional way of purchasing lease properties. Buying a property with finance (mortgage), rehabbing it, renting, and repeating the same process. 

The most traditional way of buying properties is with the help of some loans, usually from lenders or a bank. You’ll need to have a down payment, pretty stressful, right? However, through this investing method buying homes has never been more straightforward. Rehabbing can add value, renting can help you generate more income and cash flow, to have a better and secure financial position, and the process can be repeated many times over. In no time, you’ll be able to construct your portfolio in the real estate industry.

B stands for Buying. There are tons of techniques to help you in this section, including loan, seller financing, cash, short-term loan, and more. It depends on what option the investor will choose. Different initial funding can have different holding costs, benefits, and gains. The main point is that you have to guarantee that the capital won’t run out and that you can endlessly keep buying properties until you reach your financial goals. Whether or not you use a real estate broker for this stage is up to you. 

How can you do that? One rule is that you should never invest in more than seventy-five percent of the ARV or after repair value of a property. Secondly, it is vital to purchase properties that are under market price. Spending too much money on a property can negatively affect your recovery from unexpected problems and issues in the future.

Giving an entire make-over to the house can cost a lot. Make sure that rehabbing the property is done well, but at the same time ensure that you’ll be able to recover the money you’ve spent on it. Adding value, function, and making it livable are the three main things to remember in the rehab stage. You don’t want to end up spending money and then not being able to get it back. Properties that need lots of fixing are cheaper, and other investors probably won’t care about the property, but those are the ones you should be looking for. Because once you focus on these properties, you can add value or equity to your sales.

Once you’ve done the rehab stage, you can then start looking for renters. It’s good to get tenants who pay on time monthly since that will help pay the mortgage and generate income for your bank account. The renting phase can be one of the crucial parts of BRRRR. That helps the with the refinancing and the rest of the cycle.

As for your refinancing, some banks can help you borrow the estimated value for your BRRRR property. You can also ask investors, friends in the real estate industry, or online websites such as Popstream, Redfin, and many more. You want to be sure to give them clear and precise pieces of information on what you need, and they might be able to help you. 

Keep in mind that you want to get as high of an estimated amount or cost as possible. A perfect combination of how well the rehabbing stage went and how much income you are getting from your first renters plays a significant role in this. 

Getting prior approval for a loan is recommended before buying. Once all the buy, rehab, rent, refinance are all successful for the first property, you can go on and “repeat” the same process again. This part is the most exciting of all, getting to experience your early success. Taking in everything that you’ve learned through the process can be extremely helpful with your next BRRRR. By doing so, you can see which parts you need to improve on. 

Focus on building your systems. A system can help you accomplish your goals and objectives by repeating the same method again and again. It’s okay to make mistakes, but be sure to learn from it, and eventually, you’ll see that the strong foundation you will cut down on the unnecessary mistakes you make throughout the process. Take notes of everything and document it so that you can go back to it whenever you need to.