BRRRR Which is easier Raising rents or Improving units?
I get questions every day from investors who want to use the BRRRR method, basically, Buy Rehab Rent and Repeat.
This is great in theory, if you have the ability to do the Rehab work.
What is actually easier is to raise the rents then to rehab the units.
Say you buy a house that is a dump and you get a discount for the condition.
You now have to:
- move people out, which may have a cost ($5-10k per unit)
- have vacant units which don't produce income while fixing (loss of $1500/month it is vacant)
- Have cash to improve units, and expertise or vendors who show up on time (Maybe need another $20k per unit and figure for cost overruns)
- rent the units, perhaps pay a rental fee (paying a $1500 fee to place a tenant is worth it to get the right tenant)
There are a lot of things that can go wrong with this method as you can see, and there is a lot of cash outlay.
It is much easier to RAISE RENTS TO RAISE VALUE
- Buy a property with lower than market rents and get a discount
- work with the tenants to slowly raise their rent
- refinance the building with the new rents
In markets where rents are rising quickly the current owners often do not keep their tenants up to date with market rents.
You need patience and maybe some time, but not as much cash outlay.
ADVICE-- FIND A GOOD HOUSE WITH LOW RENTS, AND SLOWLY GET THEM TO MARKET THEN REFINANCE
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