The BRRRR method of real estate investing continues to grow in popularity, and this is especially true among first-time or beginner investors. It allows you to start small and work your way up, even when you have extremely limited funding. It’s also perfect for learning the ins and outs of real estate investment, from acquiring funds from private lenders to maintaining the property over time.
What does BRRRR Stand For?
The BRRRR acronym stands for Buy, Repair, Rent, Refinance, and Repeat. It’s a process that investors will repeat many times over the course of their careers, and it has proven to be one of the most reliable ways to develop a solid property portfolio.
- Buy – The first step in any investment is the purchase. There are several ways to fund the initial purchase, including private loans and all-cash deals. Most investors choose bridge loans to help them get started because they are flexible and affordable.
- Repair – The second “R” can stand for repair, rehabilitate, or renovate, and it simply refers to revitalizing the property and restoring it to a desirable residence. The goal here is to improve the after-repair value (ARV), which will be important when you eventually refinance.
- Rent – Once the property has been renovated, you can proceed to rent it out. In this way, you can start collecting the capital you need to take care of your other obligations and later finance another property. It’s important to look for quality tenants with good payment histories.
- Refinance – After the property has been restored, work with your lender to refinance your original bridge loan into a longer-term rental loan. After the property has been refinanced, you can continue to collect passive income in the form of rent and enjoy a much lower monthly loan payment.
- Repeat – The ability to repeat this entire process from the beginning makes it one of the most powerful real estate investment methods in existence. Once you have refinanced the property, you can use the capital you collect to finance another property.
Who Should Use the BRRRR Method?
The BRRRR method of real estate investing is ideal for anyone who wants to build a rental portfolio with several streams of income over time. Unlike fix-and-flip or new build investments that allow you to collect a generous sum of money in a single transaction, the passive funds you can earn via the BRRRR method will help you fund future investments while netting a significant profit. In other words, if you are interested in building your net worth via passive income streams, the BRRRR method is ideal. If you want to collect a hefty profit in a single transaction, fix-and-flip or new build investments are by far the better options.
The BRRRR method of real estate investing is perfect for anyone who wants to put themselves on a path toward long-term passive income. United Lending LLC has helped thousands of investors build impressive portfolios with flexible and affordable private money loans.