The Cons of BRRRR

Now that we know what BRRRR is and what the pros of doing it are, we can take a quick look at some of the cons. Whenever we talk about cons, it isn’t to deter you from trying something new. Instead, sharing some of the drawbacks of certain types of investments can help you decide what you need to watch out for in trying this new venture! Or, it can encourage you to try a different type of investment; one better suited to your station in life.

Now, the cons:

Interest and Appraisal

First, you’ll need to consider money. You will most likely get a short term loan, which will have high interest and could result in an initial negative income. However, if it’s the right property, this should only be a temporary setback. But if you’re already struggling with making ends meet, this may not be the best plan. Additionally, fixing up a house means knowing how much that will cost, so make sure your initial appraisal is close to correct. Unfortunately, in home repair, things pop up all the time that could add to not only the expense of the upgrade, but also the time.

Refinancing and Loans

Banks have a “seasoning” time, where they wait a set amount of months (usually half a year to a year) before refinancing the property. While this is very reasonable, it could cause some problems, depending on how long your short-term loan extends. Therefore, make sure it is at least 18 months long, giving the bank plenty of time to “season” your property. As for the loans, you’ll have to juggle two: the short term one, and the one you take on when the property is refinanced. Make sure to shop around for the right lender and get the best deal on fees.

Property and Tenant

Make sure you are up to doing major renovations yourself. If you don’t like heading up big projects, BRRRR may not be for you. Additionally, don’t get so wrapped up in the project that you don’t select the right client. It’s still important for you to get a right tenant, so continue good practices in vetting the tenant before you approve them.

BRRRR shouldn’t be scary. These past three posts are here to help you realize if it’s right for you, not scare you away! It can be an accessible start to real estate, but make sure you know what you’re getting into!

For more information about BRRRR, check out the article that inspired this blog: https://www.biggerpockets.com/blog/brrrr-pros-and-cons

The Pros of BRRRR

Last week we took a quick look at what BRRRR is. This week, we’ll check out some of the best pros for getting involved in BRRRR.

First, you don’t necessarily need a lot of money to do it. If you can get a good short-term financing option, it could really open up the possibilities of you not needing as much hard cash to start your real estate investing.

Second, high return on investment. Once you fix up the property, you have passive income streaming in, that could very well quickly cover any money you spent. Additionally, rehabbed homes can be rented out at a higher rate than homes that are not as redeveloped, giving you an additional return on investment.

Third, you get higher equity. Because you’ve remodeled the home, it’s worth more than what you purchased it for.

Finally, it can be a good way to build your portfolio. If you continue to find great deals, you can continue to build your investments. As long as you know your numbers and what you can afford, you can put yourself in a good position for investing solely with the BRRRR method.

These were a few of the pros of BRRRR. However, it’s not a perfect system. Next week, we’ll discuss some of the drawbacks to investing with the BRRRR method.

 

To learn more about this topic, check out the article that inspired this blog: https://www.biggerpockets.com/blog/brrrr-pros-and-cons

BRRRR – What is it

Renovation shows on HGTV are really popular right now. A home owner is living in an outdated house, and they want something more modern. In swoops a team of home renovators who fix up the home and it’s perfect for the family’s needs!

BRRRR is a little like that. BRRRR stands for “buy, rehab, rent, refinance, repeat.” A real estate investor buys a property that is outdated and undesirable, and then fixes it up! Now, the investor has a desirable property. While he or she could sell it and turn a profit, they rent it instead, creating a stream of passive income. If the investor needed a loan to fix up the property, the revenue from the rent pays for that, and once that is paid off, it’s a steady stream of income.

BRRRR is a cyclical process. First, buying a home and fixing it up (making it more valuable). Next, finding a tenant (which should be easy if the renovations went well). Then, a loan to cover costs (if you don’t have enough cash to cover it). Then, finally, a stream of income from the tenants, and you’re off to find a new property to revitalize.

Here are some things to know while considering BRRRR:

  1. Consider getting a short term loan to purchase the property and fix it up, but then refinance the property at the bank to build equity and pay back the loan
  2. Banks typically only refinance up to 75%, so make sure that you are fixing the property up to be worth more than what you paid for it

BRRRR can be a confusing topic, so we’ll jump into more details in the next few blog posts!

 

Check out this article that inspired this post to learn more: https://www.biggerpockets.com/blog/brrrr-pros-and-cons

Halloween Decorating

Sometimes sprucing up your property isn’t just about maintaining lawn care. Sometimes it means getting in the spirit of holidays. We’ve all seen our neighbors’ yards decked to the max, with spooky skeletons and blowup gravestones. Although it doesn’t seem like you can top that level of décor, you can find cute, affordable ways to spruce up your property. Here are a few ideas:

First, use your pumpkins. Chances are you already have some pumpkins lying around for decoration. If you want them to add a level of spook to your house, consider turning them into characters! With black paint and pipe cleaner whiskers, soon a black cat will be sitting on your doorstep. And if you turn a green pumpkin on it’s side, you can have the stem serve as a witch’s long nose.

Foam is also your friend. Cut out black foam into bats, and hang them from your tree! Then, if you have foam boards, you can easily cut those into gravestones. You can even have your kids decorate them however they want!

You may have heard of cutting out snowflakes, but have you heard of cutting out spiderwebs? If you use a black trash bag as your canvas, you can fold it up and cut out pieces of it until you have your picture perfect spiderweb!

Cheesecloth also does more than helping with moisture. You can wrap it around mason jars and attach spider stickers to have little spider spots. Put a candle in the mason jar for even great effect! And then, if you rip up your cheesecloth a little more, you can hang it from your house to created spooky drapes!

Finally, use a wreath frame and plastic eyeballs to create a fun wreath for watching visitors!

Use these ideas as a jumping board to create some of your own decorations as well!

To see the inspiration behind this post (and some good pictures), check out this article: https://www.hgtv.com/design/design-blog/entertaining/10-adorably-scary-halloween-decorations-to-make-with-kids

The Fall Market is the One for You

The real estate market doesn’t always have the best track record in the fall. However, there are a few reasons you should consider buying your house in the fall.

First, less competition. Because most people don’t have much faith in the fall market, you won’t be competing with dozens of other buyers (hopefully)! That way, you’re able to take more time to decide, making sure that you get the house of your dreams!

Second, you’re in a better spot for negotiating. If you’re looking at a house that failed to sell this summer, chances are the owner is tired of having that property still on the market. You can use that to bargain for a price that fits your needs, as well as those of the seller.

Third, all the holidays are coming up. You’re not the only one who wants to be home for the holidays! The seller will also want the stress of an unsold property off their plate. If you finalize the deal in the fall, neither of you will have to worry about it interfering with your holidays!

Fourth, buying in the fall sets you up well for furnishing at the end of the year. Not only do you get end-of-year sales to shop, you also get to have a little bit to prepare for all the Black Friday deals. After all, you can live without a dream piece of furniture or appliance for a month if it means you get a great deal!

So, if you’re still looking for a house, don’t despair! Fall will still offer you fantastic real estate deals!