10 Key Components of BRRRR Strategy Success
Whether you’re a fix and flip investor, a buy and holder, or (like me) combine both into what is commonly referred to as the BRRRR method—buy, rehab, rent, refinance, and repeat—there are certain considerations that come with every single deal you do.
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Below I detail 10 vital elements of the BRRRR process. Understanding how they relate to your business, as well as to each other, is empowering and will enable you to boost your results to whatever heights you desire.
Failure to recognize them, on the other hand… well, you could be setting yourself up for a world of hurt!
10 Key Things You Need to Know About the BRRRR Process
1. Change is inevitable.
The Navy SEALs have a great motto: “You plan your dive, and dive your plan.” Real estate investing is no different—with one caveat.
Your plans and timeline will change. It seems like this happens with every single deal. No matter how carefully you plan, the unexpected crops up or there are unforeseen delays.
The key is to understand this and to plan for it! No, I’m not trying to be smart. The point is you should account for changes in your timeline and your plans, so when things crop up, you’re ready to deal with them.
2. You’ll go over budget.
This one goes hand in hand with the first. If your plans and timeline change, then that invariably means your budget will change. Again, plan for this. Expect it to happen.
The reasons you'll go over budget are as varied as you can imagineâfrom increased costs in materials to contractor delays to finding something during a rehab you didn't expect or simply deciding that you want to do a bit more to improve the property. It might even take a bit longer to find a tenant or to sell.
Again, account for this by padding your estimates in both time and money by 5 or 10 percent. As you get more experienced, you’ll notice a pattern, and you can adjust this percentage to accommodate your business.
3. There are highs and lows.
This is just as true with investing as it is in life. There are always ups and downs. The trick is to work through them. If you feel your project is dragging on longer than you thought and you’re bogged down, the best solution is to lower your head and work through it.
Persistent and consistent effort always pays off.
4. Develop and nurture A-team relationships.
Relationships move real estate. Relationships help you find deals, fix properties, locate tenants, and sell a house—and everything else in between. So form and never neglect those powerful relationships with (who I like to call) your “A” team.
These key players include contractors, agents, lenders, title companies, inspectors, and even other investors. Nothing pays bigger dividends than strong relationships.
5. Recognize good design.
Let’s face it, we’re in a competitive market. And we always will be. The reasons for competition may change, yet the idea of staying ahead of the curve never will.
You want to create a “wow” factor on every level of a fix, rent, and sale. That’s where great design really comes into play. Do more than the basics. Painting, new floors, and shiny appliances are vital, but where can you truly transform a property into something more valuable?
Turning a three-bed into four dramatically increases value and wows a potential tenant or buyer. Taking down walls to open up an older home and create a more spacious and modern look really has a tremendous effect. Finishing basements and adding amenities gives your property that feeling of desirability you want.
Remember, today’s tenant and today’s buyer are far more discerning than decades ago. Their options are open, so do all you can to provide them with plenty of reasons to choose you.
6. Know when enough is enough.
Great design and wowing improvements can really make a big difference—but you’ve got to be careful you don’t cross the line. It’s important to know when you’ve done enough and more importantly, when not to go further. It’s entirely possible to rehab yourself into the poor house.
It’s great if you rehab a property to be four beds and three baths with a pool. However, if all the other houses around you are 3/2 and no pool, then your property suddenly becomes the overpriced big fish in a small pond. And you’ll be in trouble!
7. Set up weekly contractor meetings.
Stay on top of the rehab. Don't micromanage, but also don't turn your back and just assume it's all going perfectly. Meet every week with your contractor to discuss the project's progress, budget, and timeline.
8. Mistakes will happen.
Sorry to burst your bubble, but this is something you can’t avoid. I’m not saying there will be mistakes on every deal; however, you should expect them to crop up from time to time.
This goes back to the first point I made: A wise investor will plan for errors. Give yourself enough wiggle room when estimating to account for mistakes without completely blowing your budget out of the water.
9. Communicate often with your contractor.
The last two points tie into this one, too. The best way to avoid or limit mistakes is to communicate with your contractor often. I'm not talking about the weekly meeting; that's one thing. But talk to them every day or two and just check to make sure everything is going well.
This also helps limit the possibility that a contractor will do something incorrectly. If you can nip it in the bud before it happens, you'll save both time and money.
10. You can do it.
Anybody can be a successful BRRRR investor if they simply are willing to do the work. You also have to be brutally honest with yourself in regard to your strengths and weaknesses.
Acknowledge the areas in which you’re skilled and the areas in which you need expert help. There’s no sense in trying to reinvent the wheel. You can’t be an expert in everything, so fill in the gaps with those who are.
Grasping these 10 keys will help you unlock the doors to success in real estate!
Questions about any of the above? Advice to add?
Let’s talk in the comment section below.