BRRRR strategy steps for buy-and-hold investing

14 Replies

Hello BP,

This is my first official post here, and I would like everyone's feedback. I am new to rental buy and hold investing. I have listened to dozens of BP podcasts and read the following BP books:

  • The book on Rental Property investing
  • The book on Flipping Houses
  • Long distance Real Estate investing
  • The book on investing in Real Estate with no (and low) money down. (will complete this week)

I am convinced that the BRRRR method, using hard or private money lenders to acquire property, is the best strategy for me. I am big proponent of systems and lists. It is how I learn to make complex things a bit more simple for me. With all of the information I have gathered from BP podcasts and books, I put together the following list of steps for the BRRRR strategy. I will be using the final version of this as a guide and general checklist for each deal I pursue. Please review this and let me know if I missed any steps or if you have some ideas on how I can make improvements. Any feedback is appreciated. Thanks in advance!!

Here are the steps:

BUY

  • 1. Set your buying standards for your target properties, and overall investing strategy. MFR or SFR, or both? Cash flow requirements, how much forced appreciation can be added, etc.
  • 2. Collect members of your investment team (Lenders, Agents, Property Managers, Contractors, etc.). Ask for referrals. Make them aware of your strategy and goals, and that they align with them. Interview them and ask questions.
  • 3. Determine if an entity (LLC, etc.) is needed and fits into your strategy. Set this up in advance. If needed, set up a business checking account.
  • 4. Gather forms: Rental minimum qualifications form, application, annual lease form, etc.
  • 5. Locate target property for sale.
  • 6. Analyze target property:
  • Run numbers. Account for all expenses. Verify rents (rentometer.com, Craigslist, property managers, etc.).
  • Look at comps to compare.
  • Estimate rehab including holding costs from lender (if applicable).
  • Determine grade of neighborhood (A+ through C-). Also factor distance to schools, nice shopping centers, crime, etc. and other important data.
  • 7. Submit offer with inspection contingency.
  • 8. If not using your own cash, shop for lenders. Use the information you gather for approval for hard or private money lender for the acquisition, and a conventional or portfolio lender to refi.
  • 9. Your offer accepted, enters escrow:
  • Have property inspected. Compare scope of work with multiple contractors.
  • Complete due diligence. If unit(s) are occupied, complete tenant due diligence.
  • Identify a general design idea for the renovation, including materials.
  • Determine if a bedroom and/or bathroom can be added to increase rent and ARV. Adjust numbers, if additions can be made.
  • If needed, revise offer or ask for credits based on inspection, etc.
  • Receive hard or private funds to close escrow.
  • 10. Escrow closes. The property is sold. Buy insurance, etc.

REHAB

  • 11. Select contractor to rehab the property. Create payment schedule to disperse funds at agreed rehab intervals. Communicate often and ask for pictures and video at each stage of rehab.
  • 12. Select final design and materials for the rehab. Consult with your property manager about tenant tastes and the contractor on rental rehab styles for the area.
  • 13. Have your property manager also check on the quality and status of the work. Ask for their stamp of approval before releasing final payment to the contractor.

RENT

  • 14. If already occupied, have property manager direct tenant payments to you. If vacant, property manager should market to tenants based on your criteria.
  • 15. Once a target tenant is found, collect deposit, first/last month’s rent and make sure to cover all policies and expectations. Tenant moves in. Vigorously dance in celebration.

REPEAT!

Updated 3 months ago

I forgot to add the key element to this strategy: REFINANCE. I just learned that you cannot edit your posts.

@Lawrence Williams you’re missing the best part of the strategy! The Refinance step where you can recuperate the dollars you spent purchasing the property!

Buy
Rehab
Rent
Refinance
Repeat

Thank you Denis. You are right. I was rushing out the door when I wrote this. I will make the revision.

@Lawrence Williams it’s a very thorough list! I’ll mark the post for future reference.

You sound a lot like me. I’m very list oriented and want to make sure everything is lined up before I execute. Sometimes that can be a personal road block for myself. Don’t let it deter you from getting into the action!

@Lawrence Williams

Super awesome post.

I'm just starting to get back into the real estate game and your article is a great refresher and checklist for the method. Saving this gem for sure. Good luck!

Howdy @Lawrence Williams

Good start on your list. 2 key items for me are determining a good ARV upfront and getting the Refinance loan pre-qualified/approval prior to purchasing the property. You get these right and the rest become easier.

I might add with "buy"  to determine sellers motivation and needs before constructing your offer. Analyze them, not just the property. Good luck!

@Lawrence Williams    Thank you so much for your post.  I happened to read this at the perfect time.  I have been slowly trying to get my partner on board and explain what I am trying to do.  I've verbally tried to explain, encouraged podcasts, books etc....   I think your post is just the right format and info so as not to overwhelm.  I say at the right time because we are in the midst of looking at a home out of state and I want to pull the trigger but partner needs to be on board.

That said, I also find this checklist extremely helpful as I try to create and organize myself.  I also appreciate the tips that people have shared....thanks BP community

Good luck

562-619-9700
Originally posted by @Kathy Villagomez :

@Lawrence Williams   Thank you so much for your post.  I happened to read this at the perfect time.  I have been slowly trying to get my partner on board and explain what I am trying to do.  I've verbally tried to explain, encouraged podcasts, books etc....   I think your post is just the right format and info so as not to overwhelm.  I say at the right time because we are in the midst of looking at a home out of state and I want to pull the trigger but partner needs to be on board.

That said, I also find this checklist extremely helpful as I try to create and organize myself.  I also appreciate the tips that people have shared....thanks BP community

Good luck

 You got it Kathy. Thank you for the feedback. I am glad that you found it useful. 

Thanks fellow list maker @Lawrence Williams ! I coped and pasted into a Word doc along with the other suggestions people made.

Good luck and keep us posted on your journey into BRRRR.

I made a revised version of these steps. As I am going through this process for the first time, I am finding more ways to be efficient and minimize mistakes. Here they are:

BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy buy-and-hold steps

PRE-BRRRR STEPS

  • Set your buying standards for your target properties, and overall investing strategy. MFR or SFR, or Commercial? Cash flow requirements, how much forced appreciation can be added, etc.
  • Collect members of your investment team (Lenders, Agents, Property Managers, Contractors, etc.). Ask for referrals. Make them aware of your strategy and goals, and that they align with them. Interview them and ask a lot of questions.
  • Determine if an entity (LLC, etc.) is needed and fits into your strategy. Set this up in advance. If needed, set up a business checking account. Speak with a CPA and real estate attorney to find how you should be structured to minimize liability and taxes.
  • Gather forms: Rental minimum qualifications form, application, annual lease form, etc.

BUY

  • 1.Locate target property for sale.
  • 2.Analyze target property.
  • Run numbers. Account for all expenses. Verify rents (rentometer.com, Craigslist, property managers, etc.).
  • Look at comps to compare. If market is depressed and has huge price gaps, rule out low priced distressed comps.
  • Estimate rehab including holding costs from lender (if applicable).
  • Determine grade of neighborhood (A+ through C-). Also factor distance to schools, nice shopping centers, crime, etc. and other important data.
  • DETERMINE ARV!
  • 3.Submit offer with inspection contingency. If market allows, initial offer should be 20% less than asking or pass 70% test. Choose the lower
  • 4.If not using your own cash, shop for lenders. Use the information you gather for approval for hard or private money lender for the acquisition, and a conventional or portfolio lender to refi.
  • 5.Your is offer accepted. Escrow opens.
  • Take high quality pics of entire property. If out-of-state, ask realtor or use a service (wegolook.com)
  • Have property inspected. Create checklist/punch list of needed fixes. Compare scope of work with multiple contractors for bids.
  • Complete due diligence. If unit(s) are occupied, complete tenant due diligence.
  • Identify a general design idea for the renovation, including materials. Use examples from Pinterest, Zillow, Trulia, etc.
  • Determine if a bedroom and/or bathroom can be added to increase rent and ARV. Adjust numbers, if additions can be made.
  • If needed, revise offer or ask for credits based on inspection, etc. If seller’s performing any work, have property re-inspected.
  • Receive hard or private funds to close escrow. Loan will be between 9 – 12 months. Buy title insurance, etc.
  • 6.Escrow closes. The property is sold. Buy insurance, etc.

REHAB

  • 7.Select contractor to rehab the property. Create payment schedule to disperse funds at agreed rehab intervals. Communicate often and ask for pictures and video at each stage of rehab.
  • 8.Select final design and materials for the rehab. Consult with your property manager about tenant tastes and the contractor on rental rehab styles for the area.
  • 9.Have your property manager also check on the quality and status of the work. Ask for their stamp of approval before releasing final payment to the contractor.

RENT

  • 10.If already occupied, have property manager direct tenant payments to you. If vacant, property manager should market to tenants based on your criteria.
  • 11.Once a target tenant is found, collect deposit, first/last month’s rent and make sure to cover all policies and expectations. Tenant moves in.

REFINANCE

  • 12.Appraise for ARV. Refinance with conventional or portfolio lender on 15/30-year term. Pay hard/private money lender back.

REPEAT!

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