You know what I really like about ligers?
Picks the best traits of lions and the
best traits of tigers and combines them
into one beast and you know something else
that combines the best of two things
into something totally new and totally
cool? BRRRR real estate investing. You know
it's the perfect cross between house
flipping and rental property investing
it takes the benefit of both and make
something incredibly powerful that could
help you build millions of dollars in
net worth plus significant monthly cash
flow in shorter time than you ever
thought possible. Well my name is Brandon
Turner co-host of the BiggerPockets
Podcast and author of the Book on Rental
Property Investing and today I want to
give you a brief overview of how to
invest in fixer-upper rental properties
using this BRRRR strategy. Hang tight...
So BRRRR stands for Buy, Rehab, Rent, Refinance,
and Repeat. It's basically the strategy
where you find a nasty property and
then you buy using short-term funds, fix it up
pretty nice, put a great tenant in there
paying top dollar, refinance it to get a
nice long-term mortgage, and then repeat
the process over and over. Now, if you're
confused don't be. I'm going to give you a real
life scenario right now on a recent BRRRR
deal that I did. Now, this is the Cedar
House, so i bought it for seventy
thousand dollars then I used a private
money lender - somebody I met on Bigger
Pockets while networking - to fund the
deal and to fund most of the rehab. Now
including holding costs and other
expenses we spent about thirty five
thousand dollars fixing up the property
and man was it nice. The house rented in
no time to a great tenant who paid on
time every month and was super easy to
work with. Then we went to work
refinancing. Now, typically a bank is
going to want you to wait at least six
months after getting to purchase before
they'll give you the loan and sometimes
they want an entire year, just be sure on
that when your calculate your numbers
when you're doing a BRRRR analysis. So
after the time the house appraised for
close to 150,000 and I was able to get a
brand new loan to pay off the short-term
lender with a long-term mortgage and
drop my payment by one hundred dollars a
month. Now at the end of the day I kept only
a few thousand dollars of my own cash in
the deal and going forward with cash
flowing every month. Now, besides that
story why is BRRRR so cool? Like I said
it's kind of a hybrid between flipping
and renting - it takes the benefits of both
and reduces the risks of both, so I can build an
instant equity in my property which adds
to my net worth, but I can wait until the
market is where I want it to be at the
peak to sell. I can also get monthly cash
flow from a great tenant because great
houses attract great tenants.
Furthermore, my repairs and Cap Ex are
reduced because the house is
rehabbed already. Plus, as a BRRRR property
I can take advantage of long-term
capital gains tax which means I pay less
taxes than a flipper might. And finally...
BRRRR investing allows me to buy real estate
without using much of my own money, so
I use a private lender to fund the deal
and hopefully the repairs and I use a
long-term mortgage to pay off that
private lender. Now I've done numerous
BRRRR deals in my life where I didn't
even put a single penny of my own cash
into the deal. Finally, BRRRR can be used
with single-family houses, small
multi-family, large multi-family, and even
commercial properties. But, of course, BRRRR
investing isn't without some risks. So
what if you can't get the refinance or
what if the appraisal amount doesn't
come in high enough? Typically a bank
wants to you know they don't already
finance the whole thing nearly seventy
percent or what if you do the numbers
wrong? As with any investment there are
risks. However, here's what I love about
BRRRR. You can minimize the risks by doing
your homework. Now have I spoken to a
local bank to make sure I can qualify
for a refinance? Have I determined what
the after repair value is by looking at
recent sales comps other properties that
have sold? And have I run the numbers
properly to ensure that I'm going to
have enough equity to get the loan and
that all the numbers are going to work out
right. Now in doing your homework you can
minimize your chances of something going
wrong with the refinance and furthermore
I love the fact that if I couldn't get
the refinance I could just sell the
house and likely still make a profit and
speaking of doing the math be sure to check
out the BiggerPockets BRRRR calculator.
You can run the numbers on your next
BRRRR deal in under five minutes and
estimate your cash flow, equity, ROI and
much more - plus the downloadable PDF
reports are perfect for presenting your
deals confidently to private lenders,
banks, partners, your spouse and it's just
amazing. So check it out on BiggerPockets.com/analysis
if you've not yet used them.
Now if you want to learn more about
the BRRRR strategy I want to invite you
to a free online class that I'll be
hosting this week here on BiggerPockets.
We'll be discussing the BRRRR strategy in
minute detail to help you prepare to do
your next or maybe your first BRRRR
investment. Just head to
BiggerPockets.com/BRRRRwebinar
BRRRR with four r's. And sign
up. So I wish you the best of luck on
your future BRRRR deals and as always
stick close to BiggerPockets and your
journey towards becoming a real estate
mogul. The BiggerPockets forums are free
to post questions any time and we're putting
out new videos every week on the Bigger
Pockets YouTube page so be sure to
subscribe to our channel there. Now for
BiggerPockets.com my name is Brandon...
Signing off.