The BRRRR (Buy, Rehabilitate, Rent, Refinance, Repeat) method is a well established technique used by new and seasoned real estate investors who want to build a porfolio of real estate investment properties.
There are a lot of considerations before getting starting including financing options and the local market need for rental property. Being able to finance, refinance and rent the property are critical steps of the BRRRR method. Here are some of the pros and cons.
Low Cash Option
Traditionally, if you wanted to own ten rental homes, you would need a down payment for each with a long-term mortgage on each. Using the BRRRR investment strategy, you get to ten rental properties using far less money than a traditional rental investment path.
The BRRRR strategy ensures that investors get consistent cash flow from their investments. After the Rent step of the BRRRR process, you’ll earn passive income through the rent you receive.
If you have completely restored the BRRRR property to satisfy consumer expectations in a specific market, it will almost certainly attract excellent tenants. In exchange for particular features and amenities, tenants who pay top dollar for their rental property are more likely to care for it properly.
Since conventional loans are not available for distressed properties, the BRRR investor is stretched thin with expensive hard money loans or risky cash out on their primary.
Managing costs and the schedule of the rehab process are critical for the BRRRR investment strategy. During the rehabilitation phase, investors can be over-leveraged due to the cost and time overruns since they financed the property with short-term or hard money loans at high-interest rates. Managing contractors and the renovation work is an acquired skill, and theoretical knowledge alone can’t equip you.