Exploring Investment Strategies: Buy, Rent, Refinance, Repeat

the BRRRR method, now a household term, was coined by BiggerPockets’ one and only Brandon Truner.

BRRRR -> Buy, Rehab, Rent, Refinance, Repeat

For those in the space, you’ve definitely heard of it. It’s one of the most popular real estate investment strategies currently floating around and being executed.

The easiest way to understand BRRR is basically that you are doing a flip. However, to get the right financing for a house that has a lot of value-add potential, you will want to leverage B or C-grade lending and move up the ladder to an A-grade as soon as you can.

Naturally, this requires different financing options because traditional banks do not like to loan money out for fixer-uppers. This includes hard money, private money, equity, borrowing money from family and friends, or paying all cash. The goal here is NOT cash flow, it is to make money on the refinance as the valuation of the property has gone up. That being said, you still shouldn’t negate cash-flow potential when looking for a deal.

The key is to find good relationships with lenders and contractors. In doing so, you will know your numbers, the time it will take to finish the rehab process, and the time it will get take to get approved on refinancing (as well your likelihood of getting good refinancing improved). Or you can use our all-in-one solution, and get in touch with me or someone on my team. Message me at facebook.com/realadammalik, or text/call me at 4372270401.

Let’s run through an example of a BRRRR investment strategy.

Let’s say you find a residential property that has noticeable value-add potential, on sale for $1.5m. The bank approves a loan based on a 20% LTV, which just means your loan is for 20% of the purchase price, so in our case, that would be $300,000 (The V in Loan-to-Value stands for value which also means purchase price). Let’s then say that the cost of rehab is roughly $200,000. So far your total investment into the property is $500,000 ($200,000 for the cost of rehab + $300,000 for the cost of the loan), which is quite a pretty penny. After your rehab process which takes your contractors about 3 months of work, and you about 1–2 hours of work a week managing your contractors, your property re-appraises for $2M. You apply for a refinance and now have an LTV ratio of 90% since your original $200,000…