The “BRRR” strategy combines the house flipping strategy and the buy and hold strategy for optimum results.
BRRR is an acronym for buy, renovate, rent and refinance. You can look at it as flipping a house to yourself and holding it long term.
It can be a quick and practical way to grow your real estate portfolio.
With a Fix and Flip you get all your capital and profit back, usually within six months with the potential for a nice profit. The risk factors are high with this strategy because you are timing the market which increases your exposure to market shifts, especially since you have to repeat the process over and over.
With buy and hold investment properties you typically have less rehabbing to do. You have to pay an initial down payment but you get cash flow right away once you put in a tenant. Then you have to wait for your equity to grow.
With applying the BRRR Strategy you buy a property that is below market but has potential. This is the BUY phase in BRRR.
You use your rehab budget to make the property look great. Just as when you flip – you are making a neglected property into an attractive property. This is the RENOVATE phase in BRRR.
Your rehabbed property attracts a high quality tenant and you RENT at market rates.
You now have a quality property and a quality tenant.
Six months later when your property is re-appraised at a price higher than the total of your purchase price and rehab expense -now you have equity. This is when you REFINANCE for lower payments and greater cash flow.
The BRRR is a strategy that can be employed to any type of property to rapidly raise the value of your property and allow you to scale your real estate business at a faster pace.