BRRRR method question

4 Replies

In theory, can you BRRRR any property that needs small upgrades and isnt for sale at a discount price? For example, if you are looking to scale your portfolio with the BRRRR method but cant find deals that are discounted, could you do upgrades to the house (new front porch, kitchen, bathrooms, extra bedroom, finished garage/basement etc)?

Probably not. One of the key components in the B of the BRRRR is buying a deal at a discount. In your scenario, the purchase price will likely be close to the tentative ARV. Not sure how you would be able to recoup all, if not most, of your acquisition money during the refi process. Unless, its a HOT market that will appreciate considerably by the time you refi.

depends on the location of the house. Each house needs to be evaluated carefully. Also upgrades you mentioned are not small specially kitchen/bath. When you look at the house think on how you add value or what things are missing in that. If you know the prices of upgrades then when looking at house create a list of items which would need to be fixed. If possible get someone who is handyman or knows how to do small work and get their input on price.

@Michael Nolan Yes, it's a similar concept. BRRRR method utilizes the equity "trapped" in the property. Your equity is increased when the value of the property increases. One way to increase the value of the property is to "force appreciation" through upgrades you mentioned.

Just make sure the value of the property increases enough to make the refinance worthwhile. For example, if you upgrade the kitchen and the value of the property only increases $5k, it's not worthwhile to incur additional closing costs when you refinance. 

    Just noticed you mentioned "small upgrades". I agree with @Sud S.  

    "new front porch, kitchen, bathrooms, extra bedroom, finished garage/basement etc" are NOT small upgrades. 

    Small upgrades are paint, door knobs, sometimes floors, updated light fixtures. Typically, sub $5k in total rehab. That's what I consider "small upgrades"

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