Updated 3 months ago on .
The New BRRRR! - BRRSSBRR- I need to write a book!
I've recently developed a new BRRRR strategy/system. It's not new, but not many people are doing this and developers/builders certainly aren't doing it for everyday investors.
I'm going to coin it: BRRSSBRR - Buy, Rehab, Rent, Split, Sell, Build, Rent, Repeat
It's one of the few strategies that can actually work for cash flow or massive profit in Boise with the current market and interest rates. Here are the basic steps: 1. Buy a property that has split potential. 2. Rehab the property if necessary. 3. Rent out that property while splitting lot 4. Complete lot split. 5. Once lot is split, sell original house (unless it really was a good deal even without the land). 6. Build a new house or small multifamily on the new lot. 7. This new build now cash-flows with less money down than typical or, as a flip it makes six figures.
The reason why this works: In Boise, building lots are selling for minimum $150k to builders, and up to $350k+ depending on location. The cost to split the lot is a fraction of that cost usually. We target deals where that extra land is free (most are, because the land isn't worth that much until its split). There is typically also equity added on the build, which is rolled into the long term mortgage for the rental. You can get a mortgage on the original house, and break even on rents (typically requires 20-30% down to do so), while going through the split. You can also recoup most of the new build costs (entitlement, development, build, and sometimes interest even), in the loan on the new build. As an added bonus, if you are keeping the new house as a rental, new construction has significantly reduced capex expenses typically for at least the first 10 years. Here's an example of a property that is currently on our list:
Purchase price: $425k
Down Payment: $106k
Entitlement & Development costs: $95k
Renovation of existing house: $75k
Max required capital (depending on how loans are structured): $331k (could be far less if you use max leverage)
Total capital remaining in deal after selling original house (and making a profit): $115k or less depending on loan structures and leverage
Profit on new house if sold: $178k
Or $850 monthly cash flow as rental.
Would you do this deal? Has this strategy been on your radar? What would hold you back?
