Wondering how to make money in real estate? Looking for the best real estate investing strategy for beginners?
How about the BRRR strategy?
What is the BRRRR method in real estate?
– B stands for buy
– R stands for rehab
– R stands for rent
– R stands for refinance
– R stands for repeat
The BRRRR strategy is a combination of flipping and investing in rental properties. It consists of buying a distressed property, fixing it up, renting it out to tenants, refinancing it in 6-12 months, and buying a new investment property with the money from the first one.
The BRRRR method has many pros:
1. You can build your real estate investment portfolio quickly. You can add a new income property to your portfolio every 6-12 months.
2. You can make money from forced appreciation. The value of your investment property will appreciate as soon as you’re done with the rehabbing.
3. You need to pay out of your own pocket just once. You only need to finance the purchase of the first income property. Each next rental property will be paid for by the previous one.
4. As a real estate investor using the BRRRR strategy, you will make money in the short term. As soon as you’ve fixed your property and rented it out to tenants, you will start receiving a monthly rental income.
5. The BRRRR method allows investors to make money in the long run. Within a few short years, you can build your own real estate empire.
How about the cons of the BRRRR method in real estate investing?
1. This is an active real estate investment strategy. While it might be possible, it is hard to invest through BRRRR part-time. If you are looking for a passive real estate investment strategy for beginners, you should watch https://www.youtube.com/watch?v=Pk483fR72TY.
2. There is a big risk if you underestimate the rehab costs. You should estimate the fix expenses carefully; otherwise, any unexpected cost might break your budget.
3. With the BRRRR strategy there is the risk of your income property not appreciating quickly enough. In this case you might not be able to refinance as fast as you’d like.
4. Just as with any other rental property, renting out to tenants comes with a risk, such as too much damage to your property or not paying rent.
How can you succeed with the BRRRR method? Just make sure to follow these tips:
1. Before buying an investment property, hire a professional home inspector and analyze the rehab costs in detail.
2. Invest in a real estate market with strong natural appreciation. This will help push up the value of your investment property.
3. Do the fixes and repairs smartly. Focus on fixes with a high return.
4. Screen tenants carefully. Don’t rush to rent out your property to just about anyone.
5. As with any other real estate investing method, have an exit strategy. You should have a plan what to do in case things don’t go as planned.
In sum, the BRRRR strategy can help you start out in real estate and build wealth. But you have to be ready to be actively involved and engaged in your real estate business.
If you’d like to learn more in-depth about BRRRR in real estate investing, read https://www.mashvisor.com/blog/brrrr-strategy-ultimate-guide/.
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