In the world of real estate investing, one of the most common strategies that investors are talking about regularly is the BRRRR Strategy.
If you’re unfamiliar with what this strategy means, and how you can use it in multifamily investing, this article will provide you with a breakdown of the BRRRR Strategy and how you could use it to your advantage.
What Is The BRRRR Strategy?
The BRRRR Strategy is simply an abbreviation that stands for buy, rehab, rent, refinance and repeat.
Buy – When you’re purchasing a multi-family property utilizing the BRRR Strategy, your goal is to find a rental property that you can add value to through making repairs.
Rehab – Besides searching for a multi-family property that’s going to need repairs, you should also be searching for a property that also needs to be fixed up or rehabbed.
The repairs or rehab that the property needs can be anything from painting, add new flooring in the units of property, to more advanced repairs like foundation, structural, electrical or plumbing.
Following the BRRRR Strategy is investing 101 because, anytime you can invest Sweat Equity into a property it’s going to increase the value of the property immediately.
Rent – After the property has been purchased, rehabbed, or repaired, the next thing that you want to do is to rent that property out so that you can start making money from it.
Depending upon the repairs and or renovations at the property may need, it may take you 30, 60 or 90 days to get that property in rent-ready condition. This is why you need to do your due diligence before purchasing a multi-family property so that you know the full extent of the repairs, or renovations the property needs before you purchase it.
Refinance – After your multi-family rental property is occupied and producing cash flow, The next step in the BRRRR Method is to refinance that property. By refinancing it, you will have the ability to take back all or most of your money from the property to invest money into other multifamily properties.
Repeat – Last of all, the final step utilizing the BRRRR Method is to repeat the entire process all over again once you invest in another multifamily rental property.
Having a concise system that you can use to generate predictable and reliable cash flow is the goal of every business. Using this system is going to give you the confidence that you can purchase a multi-family property, make repairs or renovations, and then get the property earning cash flow before you invest in another multi-family property.
Don’t forget that if you plan on financing your next multi-family rental property, most lenders require a down payment of at least 20% plus depending on the condition of the next property that you purchase you’re going to need money for repairs and or renovations.
Thankfully, when you utilize the BRRRR Strategy, you have a predictable way to generate the money that you need to continue purchasing multi-family rental properties throughout your real estate investing career.
What’s The Key To Success With The BRRRR Strategy?
As I mentioned earlier in this article, the key to success with utilizing the BRRRR Strategy is to find the right multi-family property that you can purchase at a discount because the property needs significant repairs or renovations.
Besides searching for properties that need repairs or renovations, your goal should also be to find a seller that’s motivated and willing to eventually give up their equity upside for favorable terms. The favorable terms that they could be open for me include a fast-closing or seller financing.
Tips For Finding Potential BRRRR Deals
You may be wondering how you are going to find BRRRR deals when most investors are purchasing multi-family rental properties across the United States at a record pace?
The answer to this question is simple, the best way to find potential BRRRR deals across the United States is to do more marketing including online marketing, direct marketing, text message marketing and more.
In today’s world, it’s best to utilize a combination of both online marketing and direct mail marketing because, even though many investors are used to being advertised over the internet, there still are a large portion of investors nationwide who are open to receiving direct mail.
One of the great things about direct mail marketing is that direct mail often has more effective open rates than email or any other form of digital marketing. Many people are more been willing to open up a piece of mail that sitting in front of them rather than opening up cold email or a text message that’s sent to them from someone that they don’t know.
BRRRR Strategy Success Tip
After reading this far, you know principles of the BRRRR Strategy but I need to reiterate that with this strategy you’ve got to keep her focus on fixing up the property and renting it out as soon as possible so that you can get it into cash flow.
Buying a multi-family investment property is different than buying a Fix and Flip property because with a multi-family property your goal is to get the property in livable condition so that you can rent it out quickly.
With a Fix and Flip property, your goal is to invest in the best repairs and renovations so that you can sell that property for the most money possible.
Even though you may want to invest in the features that you would like to see in the property that you would live in, the reality is that you should stay focused on only investing in the repairs or innovations that will get a multi-family property in a livable condition so that you could start renting it out.
Some of the repairs are Renovations that you should be focusing on include:
● Replacing the HVAC system.
● If the roof is currently leaking, you should repair the leak and replace the roof if needed.
● Since renters spend the most time in kitchens and bathrooms, you should focus on renovating both areas in the units of the multifamily property that you purchase. The renovations that you should focus on in kitchens and bathrooms included refinishing cabinetry, painting, repairing or replacing flooring and replacing plumbing fixtures if needed.
Remember that was the BRRRR Strategy your goal is to get the property repaired and are renovated in the fastest man of time possible that you can so you could start renting that property and get it into cash flow.
Unless you plan on doing any of the repairs or renovations yourself, it’s best to hire a local contractor or handyman because this will save you the time and hassle of having to working on the multifamily property yourself, so you could focus on doing other productive things like growing your portfolio of investment properties.