BRRRR stands for Buy, Rehab, Rent, Refinance and Repeat, it allows you to buy your next investment with the equity you’ve built up in your existing property(s).
The best way to apply the BRRRR method is to find distressed homes you can buy at a discount. This involves using the rule of 70% in real estate.
There are several ways to buy real estate, such as cash, hard money loan, seller financing, or a private lender. It may be a good idea to plan on bringing 30% of the purchase price to the table. This gives you some wiggle room with the down payment and closing costs.
Determine what needs to be renovated and what will add more value to the property.
For example, you may want to look at higher-end countertops and flooring options to increase a property’s perceived value. While an updated roof, kitchen, bathroom, and overall condition of the property will maximize the property’s market value.
The value of a rental property is dependent on the income it brings in. So if a property is in good condition and is able to bring in market or above market rents its value will be much higher than one that doesn’t.
The equity you’ve built up in your existing property can be used as a down payment on another through refinancing. Lenders will generally want to see a 70% loan-to-value ratio before allowing you to access the equity in the property.
You might also need to hold the property for a specific time period before you can refinance it. You’ll want to see what the bank requires in this situation.
Now find another property and reapeat this system all over again.