Breakdown of BRRRR Method

[Jude Cineas]

Here is a breakdown of each step in the BRRRR method:

1. Buy: Find a distressed property that is priced below market value. This could be a property that needs significant repairs or one that has been on the market for a while.
2. Rehab: Once you have purchased the property, renovate it to increase its value. This could include cosmetic upgrades like new paint and flooring or more extensive renovations like updating the plumbing or electrical systems.
3. Rent: After completing the renovations, find a tenant and rent out the property. The rental income should cover the mortgage payment, property taxes, and any other expenses associated with the property.
4. Refinance: Once the property is rented out and the value has increased, refinance the property to pull out your initial investment. This will allow you to use the money to purchase another property and repeat the process.
5. Repeat: With your initial investment returned, use the money to purchase another distressed property and repeat the process.

The BRRRR method can be an effective way to build a real estate portfolio with little or no money down. However, it's essential to do your due diligence and carefully assess the potential return on investment before investing in any property.

[Alex Bekeza]

@Jude Cineas A critical part of executing #4 is finding a lender with short seasoning requirements. Fannie/Freddie recently increased their minimum title seasoning requirement to 12 months for conventional loans (to use new appraised value for cash out). Most BRRR investors are pivoting to DSCR loans most of which will still allow 6 months but the most competitive will still even allow only 90 days! This is crucial since the main goal of the BRRR is the ability to scale and snowball the same capital. Well short seasoning requirements allow investors to scale much quicker and perform multiple BRRRRs per year. DSCR loans also allow (or even prefer) LLC vesting, have no cap on the # of rentals you own (step 5 of the BRRRR), and don't have any DTI requirements or even look at tax returns. Instead, they really just care about experience, FICO, and the subject property's cash flow (DSCR aka debt service coverage ratio... Gross Rents/PITI).