Tag: #BRRRR

The Cons of BRRRR

Posted on | by Allison Zuck

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

Posted on | by Allison Zuck

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

Posted on | by Allison Zuck

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