One of the biggest obstacles to building a real estate portfolio is how to finance properties without injecting a massive amount of cash, which can be infeasible and dilute returns. Enter the BRRRR strategy, one of the oldest and most dependable and predictable strategies to employ when looking to expand you single-family rental portfolio. Today we’re breaking this strategy down to show you can you can scale without the unrealistic capital injection.
The BRRRR strategy is an acronym for “buy, rehab, rent, refinance, repeat.” The strategy starts with finding a property that is undervalued and has the potential to be renovated into a higher-quality rental unit. Once you’ve determined that the numbers make sense and you’re able to buy the property cash or through creative financing methods like seller financing or hard money loans, it’s time to start the renovations.
After completing the necessary renovations to bring the property up to code and making it more appealing to renters, you’ll then list the unit on the rental market. At this point, you may be wondering how you’ll finance the entire endeavor without breaking the bank. This is where refinancing comes in.
You’ll be able to refinance the property after completing the renovations and securing a tenant, which, if executed properly, can give you access to all of the cash you initially put into the deal. From there, it’s simply a matter of repeating the process with new properties to continue scaling your real estate portfolio.
While the BRRRR strategy may seem simple on paper, it does require a significant amount of work and knowledge in order to be successful. However, if you’re willing to put in the time and effort, this strategy can be an excellent way to expand your portfolio without breaking the bank.
The most important part of implementing the BRRRR strategy in your investing is finding quality deals. In order to find these deals, you need to be constantly searching for properties that are undervalued and have the potential to be renovated into a higher-quality rental unit. This can be a full-time job in itself, but it’s important to remember that the time you invest now will pay off later down the road. Focus on deals in which your all in investment will be no greater than 75%-80% of the after repaired value (ARV) of the home. This will allow you to recoup as much of your upfront cash investment as possible after refinancing the home, allowing you to repeat the process without the substantial cash outlay.
To learn more about this strategy, or simply to connect with the best property management team in Texas, give us a call today at 469-649-7666!
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