Buy, Rehab, Rent, Refinance, Repeat (BRRRR)
A Buy, Rehab, Rent, Refinance, Repeat (BRRRR) strategy is in the family of fix and flips. The loan is used for those seeking to build their rental portfolio. You find a property, fund with a hard money loan likely, fix it up, rent it, refinance for a 30-year mortgage (which costs less than the rental income), and repeat. It helps to increase your passive income on a month to month basis. Hard money lenders typically like these kinds of loans, because:
- You have an exit strategy in place (refinancing with a bank)
- You likely have a past history of successful renovations
- You may be able to co-securitize with other previous rentals
An example of the BRRRR Strategy:
Melanie sees a great deal on an outdated, two story townhouse in Fairfax county. She knows that she can fix it quickly, and add it to her current portfolio. However, she needs to find funding quickly, and a bank loan can take 45-60 days minimum. So, Melanie turns to a hard money loan, collateralizing the townhouse and another one of her previous rentals to secure funding for the purchase as well the funding for renovation. Melanie secures the property for $140,000, puts $35,000 into modernizing the place, and rents it for approx. $1,750 monthly afterwards. She refinances out of the hard money loan, which is charging a monthly interest rate of $1458.33, to a bank note charging a monthly interest rate of $583.33.
Melanie has successfully generated passive income of $1166.67 monthly. And, she still owns this new property, and can use the equity to do more BRRRRs, or invest in a different avenue.
Overall, the BRRRR strategy can be fantastic for generating passive income, and increasing your portfolio size in the process. If you are looking to implement the BRRRR strategy, make sure that you have the property in place, and have the proper tools to secure financing. There are some hard money lenders that will lend on ARV; and, having a portfolio of past success can help. However, be prepared to co-securitize the property to have the deal financed in the end. Further, ensure that you will be able to refinance out of the deal, with a fair credit score and no delinquencies on file for the bank. Otherwise, you will be stuck jumping from one hard money lender to another. This is why the BRRRR strategy is deemed as one for more experienced investors.
By far, the BRRRR strategy produces longevity in investment by combining passive income generation with a real estate investment. The strategy builds your portfolio in multiple ways.If you think you have the proper backing for a BRRRR property, you can contact us for more information here, or click the application at the top. There is no obligations in submitting an application, and we look forward to being a part of your generation of passive income.
-Nathaniel S. Fulford VI