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BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Updated about 2 years ago, 11/09/2022

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64
Posts
14
Votes
Roger Simons
  • Los Angeles, CA
14
Votes |
64
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How did BRRR even come about? It encompasses so many things.

Roger Simons
  • Los Angeles, CA
Posted
One needs to separate each part of the process and explore in detail.  Lopping it all together under "BRRR" makes no sense.  Different techniques for different people for different areas in different situations with different needs.

First the purchase.  Layout of the house is everything.  What does the local zoning laws allow you to do?  You better be very clear on that before making your offer.  Buying a house that has lots of space you cannot rent is fruitless.  

Then the preparation for renting it. Here is where almost nobody maximizes their situation by thinking conventionally.

Then tenant selection.  Most people are very careless in this regard relying on useless "references" who exaggerate and lie for their friends.  Time with the prospect is what's needed.  Few people are willing to spend the time.  

Then tenant management.  Tenants always behave well when they first move in.  Then reality shows its ugly face.  You have to be ready to evict problem people fast and find a way of doing it amicably.  If you know of good deals in your area and can move them for free that helps hugely. Often you can find them a better deal than your place (if you're maximizing your rent) so they're happy to move!

Then deciding if its best to refinance at 80% (almost never if the rent is maximized because banks don't treat it as a business and won't recognize your huge rental income very much), sell at 100%, or use your proven rental income to qualify for a higher mortgage and buy another house as soon as you can.  If you do things radically and have radical income because of it a lot of buyers won't have the confidence they can do that as well so they won't pay you adequately.  If you're pulling in $50,000-$80,000 on a $200,000 house would anyone sane sell it for $200,000?  Often it makes no sense to sell if people don't pay you even close to what its worth.  Also you know the house and it's quirks by then and can deal with things easier than a new person will be able to with their learning curve, especially if they don't live there which few dumb real investors ever do so they're detached from their investment and out of touch with what's going on.  Often its just better to keep it and keep refining your system maximizing your income.  The challenge is often the taxes on that high income!  But if you're buying more property you can usually write a lot of stuff off if you're well organized.  Also after a while you probably have some tenants that would be happy to manage a house for you for some small compensation if its not a lot of work which it usually isn't.  That frees you to travel, do stuff like normal people and expand your holdings.  

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