BRRR strategy, explain?

Question

I have an idea of the brrrr strategy, but can someone please explain it with detail?

I’m looking to fully understand the method.

Thank you!

Chris Baxter · Answer

@Cameron Chambers

Buy a property that has value add potential. Generally a property that is poorly managed or is in need of some TLC

Renovate the property to increase rents or decrease expenses (or both!)

Rent the property out at post-renovation market rent

Refinance the property based on its new financial position

Repeat over and over and over, leveraging the new equity as downpayment on the next property

Gagan P. · Answer

Buy a property that has upgrade/renovation/rehab potential

Rehab the property (or renovate)

Rent it out at likely a higher rent than it was worth when you bought it

Refinance the property to take your renovation expenses out and ideally extra cash for the next place.

Repeat

Moises R Cosme · Answer

Buy Renovate Refinance Rent 1. Buy:  purchase the property (ideally purchase for 55 - 65% of its after rehab value)

2. Renovate:  upgrade the systems & add value to the property (your total investment should be less than 75% of the after rehab value of the property)

3. Refinance: If you have stuck to a max 'all in' project spend of 75% or less than the value of the property you should be able to refinance with a traditional mortgage lender without bringing cash to closing

4. Rent: rent the house out (rent should exceed your mostly expenses)

5. Repeat: IF you have create enough value, you should be able to get all of your investment out of the property when you refinance.  Take the money from this first BRRR & put it into your next BRRR.

Mike Hamson · Answer

B- Buy a house with cash or a short term (hard money) loan. Ideally you find a house that you can get a deal on. This could be a motivated seller, absentee landlord, derelict property etc. You could also have a specific way to add value that makes it a good deal for you. R- Renovate the property. Up to you what level of renovation you do but you should have your ARV(after repair value) in mind so that you can come out the other side in the green. R- Rent out the property. I believe the laws in the states are different here and might differ province to province but when you go to the bank, having rental income will help you get your financing. From what I’ve heard, as long as you have leases, the bank will use the income. Do your homework here.

R-Refinance by getting a mortgage on the property. If you have done your homework properly and the renovation comes in on time and on budget... then you should be able to get all of your cash back plus some. Now you have a property that you didn’t have to sink any cash into that has positive cash flow. An example here will help:

Find a deal on a duplex for 100k that you calculate will be worth 200k fixed up and will generate positive monthly cash flow. Spend 40k fixing the property. The bank appraisal comes in at 200k (this is a perfect world example) and they give you a mortgage of 80% which is 160k. You can opt to take the 20k out or keep it in and have more equity in the property.

R- Repeat the process

Courtney Trahan · Answer

@Cameron Chambers Everyone above is exactly right! A lot of my investors use hard money loans to buy and rehab the property. They then refinance into a traditional loan since the interest rates are lower on a traditional loan vs a hard money loan. You're able to build a larger portfolio, faster, by using the BRRR method instead of just buying turn key rentals.

Alex Keathley · Answer

@Cameron Chambers

David Greene’s book on BRRRR strategy is a must read imo. Really changes your mindset. After you read that, you will know exactly what it takes to become a BRRRR investor. Hope this helps! 👍🏻🎉

Kris Bucci · Answer

@Matthew Devine We used a private lender to purchase the two lots, are currently self funding the builds up to lock up at which point bank will come in and pay private lender off and fund remaining build costs.  Upon completion we will refinance and hopefully pull as much of our initial investment out as possible.

Kris Bucci · Answer

@Kevin Miller  I just got your email and will reply there too... but yes it is too bad we missed you this past week.  Sari was born in Sooke and has lived there for most of her life, except her few stints in Winnipeg and Vancouver.  I grew up on the North Island in Port Alice and lived in Halifax for 5 yrs after Joining the Navy.  I since moved back to Sooke in 2001.

I don't have my GC licence yet, but should have it around xmas.  For my current projects I am working with a GC, but I am doing all hte GC work he's just covering it with his licence and warranty.  He obviously check in on the work and I'm using trades he trusts, but I don't pay the standard GC rates.

Kevin Miller · Answer

@Kris Bucci

I just got back from a week in Sooke.  What a fantastic location.  How long have you been there for?

Are you the GC in these builds or did you contract out that scope?

BRRR strategy, explain?

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