HOW THE BRRRR METHOD WORKS

One of the many strategies to have passive income in real estate is the BRRRR method. It’s a long-term buy and hold plan that you can use with other projects in your pipeline. Great for those who like projects, want to grow fast in real estate, and aren't afraid to go through many different obstacles along the way.

In a nutshell, the BRRRR method stands for buy, rehab, rent, refinance, and repeat. These are the septs required and, in the order, they appear. Buy a property that needs some work, rehab to add value to the property, Rent preferably a long-term tenant that can give you a return of investment, refinance the property, and repeat.

BUSINESS PLAN

Establishing financial projections, traceable plans, and market insights will help you succeed on the first run since you will know how much money is needed to invest, how to distribute it, how to set a rent price, and when you will break even. Remember that the purpose of the BRRRR method is to build equity by renovating, so you can leverage the repair and improve the property's cash flow.

THE BUDGET

Before investing, you need to understand how much money you need to put in the rehab phase and strategically distribute it accordingly. Lay a good and informed budget and stay inside your boundaries. Always take into account variables like material prices that can fluctuate, and have a little extra on the side. Therefore hiring a property manager could avoid hiccups as they will weigh in on major decisions.

FINANCING OPTIONS

In real estate, there are plenty of choices to pick from. Traditional banking is a good option if you have a good credit score, but most investors use other ways to finance their property. Research Local banks in your area, private lenders, and hard money lenders.

This will help you get started. Once this part is done, there are critical things you can’t forget.

• Find a good real estate deal under fair market value
• Keep rehab costs limited to improvements
• Find reliable tenants that go through one-year season period
• Refinance using the cash-out method for capital to invest in new properties
• Start planning the next project

Then, you’ll have collateral that can help you finance your next project, so the follow-up measures you take today will help you tomorrow. Always learn from your previous experience and do better next time so you can start building a passive income that allows you to build long-term wealth.

If you have any further questions or would like to share your experience on the topic, don't hesitate to connect with me here on BP. I'd be happy to help you on your journey.

Goodluck.