Real estate is one way to earn a very high rate of return on your capital. If you are thinking about investing in real estate, you’ll want to know how to make it work. One way that can help you get to your goals is with the BRRRR Method.
The BRRRR Method
If you’ve done any kind of work with real estate, it is imperative to understand many common terms. The initials BRRRR stand for the words Buy, Rehab, Rent, Refinance, Repeat. While they can apply to many types of investing, in general, this is used for those who are going to purchase distressed properties. These are properties that have been in foreclosure, owned by a bank or are offered for sale at property auctions.
Making a Profit
Each element of this process is all about getting to your final goal: earning a profit. That also means understanding terms. For example, as those at DealMachine point out, you’ll want to know what is arv in real estate. This can help you determine if the property in question is worth repairing. It can also help you decide if you want to invest funds in a given property. Managing your capital is a crucial part of making it work for you in the short term as well when you look five and ten years down the road.
This method all starts with buying the right property. You want to find the ideal properties with door curtains and hot tub. These have a lot of potential. Consider factors such as closing costs and how much money it will take to bring the property up to the expected standards of the future renter.
Redoing the Property
After buying your property, your next step is to engage in the process of rehab. This means bringing it up to the kind of standards that will make someone else want to live in it. This kind of plan can take many forms. You can make some basic changes to an existing property like interior painting. You might also have to make more extensive changes such as redoing the entire structure in order to bring it up to current building codes.
Renting and Refinancing
Renting out the property can draw in a steady income. It can also add equity. Once the house has enough equity, it’s time to get it refinanced. This means working with a bank to help reduce the amount of money you’re carrying on a mortgage. You will have to wait for a certain period in order to get the cash you want from the lender. In the meantime, you’re building home value.
Repeat it All
Once this initial process is completed, it’s time to repeat it again. This is how you use capital and make it work. It’s also how many people can make money investing in real estate.
Anyone who is thinking about investing in rental properties should think about this method to make money.