BRRR Strategy In Canada - How does it work?

41 Replies

Hey guys.

I have been listening to the podcast for awhile now and alot of the investors who speak about the BRRR strategy find private or hard money and buy the property, reno, and refinance at the new appraised value....
Unfortunately in my market (Hamilton, Ontario) the deals I am looking at cost at least $350k and the numbers just do not work on that sized loan at 5%-7%.
I was wondering how are Canadian investors utilizing this strategy?

Really appreciate the responses!

A lot of the time a BRRRR done in the real world does not pull all the original money out. Many times people use that to refer to buying a property that would otherwise be flipped and turning them into a rental.

Zack, have you watched much of Matt McKeever's stuff on Youtube? He's from London, ON, and does BRRRs all the time. He has a few videos dedicated to BRRRing. Here's one: https://youtu.be/fe-sQlxZocY

@Joel Arndt If the numbers don't work the problem is simply a matter of paying too much. If the property is going to be worth $350k when it's fixed up and it needs extensive reno, then you need to be paying around $150-$200k for it. Check out @Luc Boiron 's recent acquisition: I just paid an $80,000 wholesale fee... as an example, he paid $600k for a property that will be worth around $1m.

I think he's planning on flipping it, but if his numbers turn out as expected he could also rent and refi at 80% and get all of his investment back.

Originally posted by @Doug Pretorius :

@Joel Arndt If the numbers don't work the problem is simply a matter of paying too much. If the property is going to be worth $350k when it's fixed up and it needs extensive reno, then you need to be paying around $150-$200k for it. Check out @Luc Boiron's recent acquisition: I just paid an $80,000 wholesale fee... as an example, he paid $600k for a property that will be worth around $1m.

I think he's planning on flipping it, but if his numbers turn out as expected he could also rent and refi at 80% and get all of his investment back.

 Yup Doug, I could definitely pull out all my money on a refi and keep the property. It's in Toronto and wouldn't cash flow though.

Also, most BRRR's in Canada and in the US don't have all their money pulled out, but if you can pull out more than your reno cost than you are already doing better than most.

The last BRRRR I did in Hamilton, ON wrapped up last December...we took out 90% of our reno costs after the refInance. I was happy with that. It's a long-term hold (think decades), so we did quality work. If we only planned to hold for 5 years, we could've saved money on the renos and possibly withdrew 100% of Reno costs.

@Ryan Kirk I am also looking to buy some property in Hamilton, as I hear it is a great market that will likely grow as people get pushed out of the Toronto market. Could you give some tips on potential areas that you found have reasonable priced homes with potential for long term growth?

Hi, I have found that in Hamilton area the only way to get positive cash flow with BRRRR is to buy a single family home in the $300-375K range and when you renovate it, turn it into a multiplex...for me, the houses I look for work well when I can split the house vertically so each unit had a full basement, yard etc...That way I can advertise them like a house for rent and no basement units that would be lower rent...I would be interested to hear from others how they do BRRRR in this area where housing prices are far above what we are seeing in the US!?

Hi! I’m an investor in Victoria BC. My partner and I have used this method of investing multiple times over. We now hold 11 doors. Like Sarah mentioned, we too follow the house conversion regulations to convert single family homes to multi unit rentals (2-4 plex). I’ll use numbers on our last project as an example.

Completed Jan 2018. Purchased for $680,000 November 2016. Reno cost of $415,000. The renovation was major - we completely gutted the interior & dug down the basement to add another suite. The property was completely rented by Feb 2018: two 1BR -$1500/month each, main floor 2BR -$2000/month, garden suite 2BR - $1800/month. The property cash flows & appraised at $1,350,000 - allowing us to pull out about 50% of our capital investment.

Hi what city was this done in?


Originally posted by @Elizabeth Milder :

Hi! I’m an investor in Victoria BC. My partner and I have used this method of investing multiple times over. We now hold 11 doors. Like Sarah mentioned, we too follow the house conversion regulations to convert single family homes to multi unit rentals (2-4 plex). I’ll use numbers on our last project as an example.

Completed Jan 2018. Purchased for $680,000 November 2016. Reno cost of $415,000. The renovation was major - we completely gutted the interior & dug down the basement to add another suite. The property was completely rented by Feb 2018: two 1BR -$1500/month each, main floor 2BR -$2000/month, garden suite 2BR - $1800/month. The property cash flows & appraised at $1,350,000 - allowing us to pull out about 50% of our capital investment.

@Alon Rokach I target the East Hamilton mountain. I look for SFH bungalows with a separate side entrance to the basement. ThERE ARE WHOLE NEIGHBORHOODS THAT FIT THIS CRITERIA

We too are looking at employing the BRRR in and around Victoria. Not quite to extent that Elizabeth has mentioned, but we have seen opportunities that we know will work. So far we've focussed on buy and hold turnkey properties to get some safe cash flow in the door, but we are starting to look at higher overall ROI BRRR like properties. Outlying Victoria area is still a great place to invest... Everyone wants to live here, but with the ocean on 3 sides we are running out of land.

Thanks for the input guys. For those who have done BRRRR's in Canada, do you find that Canadian lenders are harder to get a higher appraisal then in the States? From the podcasts it seems like people can pull most of their money out, but I get more of a sense that here in Canada people aim just to get reno costs back. Is that due to the specific properties or due to being in Canada?

Hi all, we bought a semi in Hamilton for $136k in May 2016 (downpayment $27k) put $12k into it and rents for $1300/mth. Feb 2017 we refinanced it and it was then appraised for $210k.  We pulled out $60k and bought a freehold townhouse still in Hamilton for $106k.  Deals are out there...not easy to find, yet not impossible.  

We have done similar in Victoria BC.

We bought a 5plex with cash for $900,000, renovated it for $220,000. Re-rented the building back out and then once all that was done we put a mortgage on the building for 1,000,000 and are only into it for just over $100,000. Cashflows great, is worth almost 1,500,000 now. 

There are lots of ways to get creative :) 

I do agree @Brian Dean that lending is starting to tighten up in Canada. They are being a lot tougher with the appraisals now and especially with interest rates rising. But its all about creating a good deal vs finding one.

In response to @Brian Dean

By "harder to get a higher appraisal" I assume you mean harder to qualify for a higher appraisal? Yes, absolutely Canada has pulled in the reins on lending, and qualifying is getting harder and harder. That said, we have been able to get most of the money out of our investments in previous years, our project completed in 2016 is a perfect example, we were able to pull out over 100% of our capital investment. Each deal is different though and it is more related to the specific property and project numbers than anything else - if you're paying more for a property, it stands to reason that there will be less of an upswing in price at refinance. If you're able to save on the renovation costs, conversely there will be more money there assuming the property still appraises high. Our last project, we paid more for the property and more for the renovation, so were able to pull out less cash. Does that make sense? We're on the hunt for our next project though, and are confident that we will be able to find something that will allow us to recover most of our capital investment once again - it's all about finding the property with the right numbers! I should also mention, I have invested in both Canada and the States, and feel it has less to do with what country you're investing in, but more to do with the market you're investing in - numbers here in Victoria would be very different compared to numbers in say a small town up island . . . 

Check out the original Canadian BRRRR guy, Scott McGillivray from HGTV. He does the BRRRR strategy in virtually every show and goes through the process and did it before BRRRR was an acronym. Worst case scenario the show is fairly entertaining.

As others have said, I'm going to chime in... BRRR is very possible in Canada. It is ALL about buying right! My best BRRR:

Buy: 118k

"reno": $500 (that is not a typo)

Appraisal: $180k

New mortgage at 80% was 144k, paying off my total cost of acquisition, financing, etc and leaving 22k cash in my pocket.

Originally posted by @Mike Langin :

Check out the original Canadian BRRRR guy, Scott McGillivray from HGTV. He does the BRRRR strategy in virtually every show and goes through the process and did it before BRRRR was an acronym. Worst case scenario the show is fairly entertaining.

While Mr. McGillivray has done well as an entertainer ... he's hardly the original fellow in Canada to practice the buy, force appreciation and refinance ... it's been around a very long time.

Originally posted by @Zack Tremere :

Hey guys.

I have been listening to the podcast for awhile now and alot of the investors who speak about the BRRR strategy find private or hard money and buy the property, reno, and refinance at the new appraised value....
Unfortunately in my market (Hamilton, Ontario) the deals I am looking at cost at least $350k and the numbers just do not work on that sized loan at 5%-7%.
I was wondering how are Canadian investors utilizing this strategy?

Really appreciate the responses!

 Dont force yourself to do deals when it is too expensive, I too find many materials here more suitable to US market than Canadian (specially Ontario ) market. 

@Zack Tremere Most of my rentals are in BC where the prices are higher.  I haven't done the refinance part.  My advice is find what works for you.  I took the longest mortgage amortization period the bank would give me, did accelerated biweekly payments and also do additional payments.  For me I wanted the mortgage payments as low as possible, so if I wanted to do more payments I could and I could pay it off faster.  After that I looked for places that worked numberwise and would easily rent (either as is in two cases or with 'minor' renos in the other two).  One 'minor' reno turned out to be a bit more as we had to gut the bathroom and replace studs due to a hot water tank that had leaked and the previous owner covered up the damage.  Both renos added value if I want to resell them, though the one with the gutted bathroom had to have renos to make it attract a good tenant and make it livable in my opinion.