BRRRR Method
The “BRRRR Method” is a real estate investment strategy that stands for Buy, Rehab, Rent, Refinance, and Repeat. This method allows investors to acquire properties, increase their value through renovations, and then pull out their Equity to finance future investments.
- Buy: Purchase a property, typically one that is undervalued or in need of repairs.
- Rehab: Renovate the property to increase its value and appeal to potential tenants.
- Rent: Lease the property to generate monthly income.
- Refinance: Obtain a new mortgage on the property, often at a higher value due to the renovations, allowing the investor to recover their initial Capital.
- Repeat: Use the pulled Equity to purchase additional properties, thus scaling the investment portfolio.
Example: An investor buys a distressed single-family home for $150,000. They spend $30,000 on renovations, bringing the total investment to $180,000. After renovations, the property appraises at $220,000. The investor refinances, taking out a new loan for $200,000, allowing them to recover most of their initial investment. They then rent the property for $1,500 per month and can use the Equity for their next investment.
Case Study: A real estate investor uses the BRRRR method in a neighborhood experiencing gentrification. They buy a duplex for $250,000, invest $50,000 in upgrades, and after renting it out, the property value increases to $350,000. The investor refinances to pull out $300,000, using the funds to purchase another property, thus effectively multiplying their investment opportunities.