How Can You Benefit From the BRRRR Method?

There are countless ways for real estate investors to create passive income opportunities. One of those is BRRRR, or ”Buy, Renovate, Rent, Refinance, and Repeat.”

When applied correctly, the BRRRR method is a leading technique for investors who want to use one investment property to fund another.

Unlike the average fix-and-hold strategy, the BRRRR method offers investors one final step to fulfill after successfully renting out a property: to refinance it, converting their equity into cash. When coupling that equity with loans offered by private lenders like Temple View Capital Funding LP, investors can then put their money back out into the market and begin the process again.

Buy

The strategy works only if investors purchase a distressed property needing repairs, which means it could be difficult to obtain a traditional mortgage through a bank. That’s when private lenders come in.

As with many other comparable investment projects, particularly fix-and-flip or fix-and-hold projects, it’s important to calculate the after repair value (ARV) to ensure the property aligns with the value of other similar properties in the area.

Rehab

Focus first on the repairs that will bring the building up to code. After those are completed, being strategic with the next updates is important. Identify the improvements that are sure to increase the property value without breaking the budget. That means focusing on key spaces within the house—the kitchen and bathrooms, for example—as well as curb appeal.

Rent

Lenders typically don’t refinance a property before it’s occupied by tenants; therefore, finding reliable renters after completing the rehab stage is important. Although screening for qualified tenants can feel like a tedious process, it’s a crucial step in successfully renting out the property. Reviewing credit reports, references, and basic background checks can be the difference between securing a long-term renter versus experiencing ongoing turnover.

Determining the rent amount is just as important as securing tenants. Investors will want a monthly number that is both fair to the renter while still producing a positive cash flow.

Refinance and Repeat

The BRRR method allows investors to do a cash-out refinance so they can use the money to purchase yet another distressed property and repeat the process. Investors not only need to find a lender that offers cash-out refinancing but also must be ready to meet the loan qualifications.

With the right financial partner such as Temple View, investors could have loans available for both BRRRR investments and short-term rental BRRRRs to support vacation and Airbnb properties. For more information on Temple View’s loan terms, visit. www.templeviewcap.com.

Mark Burch is a business development manager with Temple View Capital, working with investors and brokers to maximize real estate investment opportunities.
He has been involved in real estate investing since 2005 as an active investor and loan officer. His properties range from Airbnb’s to multifamily properties to SFR rentals and active flips.