BRRRR winners understand the meaning of BRRRR and, just as importantly, what it doesn’t mean.
We aren’t just talking about the literal meaning: Buy, Rehab, Rent, Refinance, Repeat. We’re talking about understanding the strategy behind the BRRRR method. Successful investors understand the money side of these investments.
Types of Properties that Win at BRRRR
Foundationally, BRRRR means buying undervalued properties.
These properties have a lot of rehab needed, causing them to be valued much lower than other homes in the area. These houses are problems for someone else but opportunities for you. You can fix them up and get them in your rental pool.
We often see people who want to use the BRRRR strategy, but they buy their properties at 90% or 95% of the ARV. They buy close to retail price, and once they put the time, money, and effort into fixing up the property… They can’t even really use BRRRR.
BRRRR’s Two-Loan Strategy
BRRRR means using a two-loan strategy. At the beginning of the project, closing with a hard money bridge loan. At the end of the project, refinancing a traditional loan.
Using this strategy on an undermarket purchase captures the equity of the home to use to your advantage. If you buy a property too close to its ARV, the whole system falls apart and you lose your refinancing power.
To be successful with this two-loan plan, you have to search for undermarket properties you can get for 75% or less of the ARV. With this 75% rule, you can complete a BRRRR project with little or no money out-of-pocket.
Buying undermarket and using two strategic loans is the meaning behind BRRRR that winners fully grasp. But there’s much more to it.
What should you really look for when you buy for BRRRR?
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