Does BRRRR mean the same thing in a declining market and a rising one?
Let’s start with the basics. What does Buy, Rehab, Rent, Refinance, Repeat mean? Your understanding of this real estate investment method will determine your success when inflation hits.
BRRRR comes down to two key factors.
1) Buying Undermarket Properties
Buying undermarket properties is the crux of BRRRR.
This important point has been confusing to people in the last few years. That’s because truly good undermarket properties have been hard to find.
We’ve been seeing people buy at 80-85% of a property’s ARV. In the near future, those values will come down.
Back in 2010, people were able to buy properties for 60-65% of the ARV. We’re hoping that’s where this next market will take real estate investors.
This method means buying undermarket properties. Inflation should make this part easier, with lower priced BRRRR properties coming back.
2) Using a Two-Loan Strategy
The other foundational concept in BRRRR is its two-step loan process.
The whole point of this method is to get into rentable properties with little to no money down. To do this, you need two loans – one to acquire it, and one to hold it long-term.
Once you own the property (using the first loan), you can refinance it using the appraised value (via the second loan).
If you can buy a property undermarket (with private money) and own it, you capture the equity of the house when you refinance it.
Instead of pulling more money from your pocket for your next deal, you can use the equity you create with one BRRRR to buy more real estate – even with inflation.
Learning More About What BRRRR Means
BRRRR means two things: buying undermarket real estate, and utilizing two loans to do it.
We’ve been doing this rental property strategy for over 15 years – before it even had the acronym to go with it! For more on BRRRR fundamentals, check out these YouTube videos, or reach out to us anytime at HardMoneyMike.com.
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