BRRRR Versus Traditional Rental

[Kenneth Garrett]

I understand the BRRRR strategy is very popular, but lets not forget the traditional rental type. So lets talk about the difference between them.

BRRRR  

Buy - Bought distressed property usually with cash or others peoples money and purchased at a discounted price.  

Rehab - Typically major rehab. The rehab intent is to force the equity and increase the appraised value (ARV).

Rental - Select a tenant and rent the unit at market rent    

Refinance - This requires to finance the property with permanent financing. If done correctly you have no money left in the deal. ROI/COC infinity.

Repeat - Since you have no money in the deal, you will want to repeat the process and scale your investment portfolio.

Traditional Rental      

Buy - Purchase the property with 20% down.

Rehab - Only minor rehab if any.

Rental - Select a tenant and rent the unit at market rent  

Refinance - Not necessary since the purchase included financing. You then want to calculate ROI/COC of your money invested. If you had put $25,000 down and the property had monthly cash flow of $400 your ROI/COC would be 19.20%. Very good return in my opinion.

Repeat - The only disadvantage is your money is stuck in, but the rehab either requires; none or very little. Repeat the process and scale when funds are available to grow your portfolio.    

Both strategies are great, but both can be used.  The descriptions are general in nature as there are many nuances to both.  Keep your options open and find a hybrid of each.  I have used both strategies to grow my portfolio.  

Share your own experiences or ask questions.