Have you ever thought about making money by renting out properties? There’s a strategy called BRRRR that lots of people use to do just that. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat.
It’s a way to turn a regular property into a money-making rental, and then do it all over again with more properties. It sounds like a lot, but don’t worry, we’ll break it down into easy steps. This strategy is really cool because it helps you grow your rental business step by step.
Whether you’re new to renting out properties or you’ve been doing it for a while, understanding BRRRR can help you make more money and be more successful. So, let’s dive in and see how you can use the BRRRR strategy to build up your rental property business.
Why BRRRR is a Great Plan for Rental Properties
The BRRRR strategy is really useful if you want to make money from renting out houses or apartments. It’s a step-by-step plan that helps you grow your rental business in a smart way. Here’s how it works and why it’s so good:
First, you buy a property that needs some fixing up. This is usually cheaper than buying a place that’s already perfect. Then, you fix it up (that’s the ‘Rehab’ part), which can make the house or apartment worth more than what you paid. After fixing it, you find people to rent it. Now, your property is making you money every month, which is great.
But there’s more. Once your property is all fixed and has renters, you can go back to the bank and refinance it. This means you might get a new loan that gives you more money than the first one you got. Why? Because the property is worth more now.
You can use this extra money to buy another property and do the same thing all over again. So, why is BRRRR so great? It’s because you’re not just buying a property and waiting. You’re actively making it better, increasing its value, and using it to make even more money.
It’s a really good way to build up your business and get a steady flow of money from renting out properties. Now you know the importance of BRRRR and let’s dive deep into the parts of this strategy.
BUY – Buying the Right Property
When you’re using the BRRRR strategy, the first step is to buy a property. But not just any property will do. You need to find one that’s just right for this plan. Here’s what to look for:
- Price: Look for a property that’s a bit cheaper because it needs work. You don’t want to spend all your money just buying it. You need some left over to fix it up.
- Condition: Find a place that needs fixing but not too much. You want something you can improve without having to rebuild the whole thing. It could be a house that needs a new kitchen or paint job, not one that needs a new roof or has big problems.
- Location: This is super important. You want a property in an area where people like to live. Look for places near good schools, shops, or public transport. If it’s a nice area, more people will want to rent it when you’re done fixing it up.
- Potential: Think about how much the property could be worth after you fix it. You want a place that will be worth more than what you spend on buying and fixing it.
Remember, the right property is the key to making the BRRRR strategy work. Take your time to find a good one. It’s the first step to making your rental business a success.
REHAB – Rehabbing on a Budget
Fixing up your property, or ‘Rehabbing’, is a big part of the BRRRR strategy, but you don’t want to spend too much money on it. Start by making a plan. List out everything that needs to be fixed or updated. This helps you figure out what’s really important and how much it might cost.
It’s smart to focus on changes that make a big difference but don’t cost a lot. For example, a fresh coat of paint can really brighten up the place, and updating things like old light fixtures or door handles can make it look modern without a huge expense.
If you’re good at DIY stuff, you can save money by doing some of the work yourself. Simple things like painting, fixing small repairs, or even putting up new curtains can be done without hiring someone else. When you do need to buy materials, take some time to shop around for the best deals.
Sometimes you can find really good stuff for less money if you look in the right places. And for the bigger jobs that you can’t do yourself, it’s important to find good workers who don’t charge too much. Get a few different quotes to make sure you’re getting a fair price. The key is to make your property look great and increase its value without spending more than you need to.
RENT – Renting to Reliable Tenants
Once your property is all fixed up, the next step is to find good people to rent it. This is super important because reliable tenants mean steady rent money and less trouble for you. Here’s how to find them:
- Advertise Smartly: Put your rental ad in places where good tenants are likely to look. This could be online rental sites, local community boards, or even social media. Make sure your ad shows off all the cool things about your property and be clear about what you’re looking for in a tenant.
- Check Their Background: When people apply to rent your place, it’s a good idea to do a background check. This usually includes looking at their credit score, rental history, and sometimes even a criminal background check. You want to make sure they have a history of paying rent on time and being good renters.
- Meet Them in Person: If you can, meet potential tenants face-to-face. This gives you a chance to get to know them a bit and see if they seem like they’ll take good care of your property.
- Set Fair Rent Prices: Make sure your rent price is fair for what you’re offering and for the area your property is in. If the price is right, you’re more likely to attract good tenants who will stay for a long time.
Finding the right tenants might take a little time, but it’s worth it. Good tenants can make your life as a landlord a lot easier and help keep your rental business running smoothly.
REFINANCE – Refinancing Smartly
After your property is fixed up and you’ve got good tenants living in it, the next step in the BRRRR strategy is refinancing. This means you get a new loan on your property, which can give you some extra money to invest in more properties.
But you’ve got to be smart about it. When you refinance, you want to make sure you get a loan with good terms. This means a lower interest rate or a longer payback period, which can help reduce your monthly payments.
It’s a good idea to talk to different banks or lenders to see who offers the best deal. You can also check with companies like Amplend, who specialize in loans for rental properties.
The cool thing about refinancing is that if you’ve increased the value of your property by fixing it up, you might be able to borrow more money than you could before. This extra cash can be used to buy another property and start the BRRRR process all over again.
Just remember, even though refinancing can give you more money to invest, you should always think about how much debt you’re comfortable with and make sure you can handle the new loan payments. Being smart with refinancing can really help grow your rental property business.
REPEAT – Repeating the Process
Once you’ve refinanced and have some extra money, it’s time to do it all over again – that’s the last ‘R’ in BRRRR, which stands for ‘Repeat’.
This is where the strategy really starts to pay off. You take the money you got from refinancing your first property and use it to buy another one. Just like before, you look for a property that’s a bit underpriced and needs some work. Then you fix it up, find good tenants, and maybe refinance again.
Each time you do this, you’re growing your business and making more money. The more properties you have, the more income you’re bringing in each month. It’s like a snowball rolling down a hill, getting bigger and bigger.
Keep in mind that you need to take it one step at a time and not rush into buying more properties than you can handle. With each property you add, you’re building a stronger, more profitable rental business.
Conclusion
So, that’s the BRRRR strategy in a nutshell. It’s a really smart way to build up your rental property business. You start by buying a property that needs a bit of work, fix it up, rent it out, and then refinance to get money for your next property.
And then, you do it all over again. Each time you go through these steps, you’re not just making your current property better and more profitable, you’re also getting the funds and experience to expand your business with more properties.
We hope you discovered the essentials of mastering the BRRRR strategy in this blog post and learn how to Buy, Rehab, Rent, Refinance, and Repeat to successfully grow your rental property business.
By the way, we offer rental loans that can be a perfect fit for your BRRRR strategy, helping you move smoothly from one phase to the next. With Amplend‘s support, you can confidently finance your next property and keep your rental business growing. Reach out to us, and let’s make your property investment dreams a reality with the BRRRR method.
