The real estate market is rapidly growing. Real estate is something that is always in demand, making it a great investment opportunity. Are you looking to build your real estate empire? The truth is, it might be a lot easier than you would have expected. Finding success in any endeavor comes from careful planning and hard work, and this is especially true in real estate. If you’re trying to excel, here’s how you can do it.
The BRRRR Method
If you’re looking to turn real estate investing into a career, then you should learn more about the BRRRR method, because it could help you grow if you do it right. The steps for this method include: buying, rehab, renting, refinancing, and repeating. It’s a popular choice for serial house flippers because it grants you the ability to continuously grow your net operating income. Now, while the steps might seem simple enough at first glance, it’s important to realize just how much careful planning and execution goes into each one.
The first step of the BRRRR method is to buy your property. You might think this step would be fairly easy, but there are a lot of important factors to consider when looking at potential properties, like:
Buying a property while using the BRRRR method is unlike anything else. For this method to best work, you want to purchase a distressed property. This is because you need there to be a significant difference between the original purchase price and the value of the property once you’re done with it.
You want to find a property that allows you an appropriate amount of wiggle room for repairs and renovations. You should keep in mind, however, that you don’t want to invest your money in the wrong place. You need to find a property that is distressed, but not in any way that is going to be too expensive to fix. Your property should still be structurally sound.
To find the right house to flip, consider touring properties with an inspector or contractor that you trust. They’ll be able to look at the house from a different perspective and offer valuable advice that can help inform your decision and guide you toward the proper one that will give you the best return on investment
When looking at properties, you should also pick something in a desirable location. Having local amenities like grocery stores, parks, and access to public transportation will draw in more renters. You should also consider neighborhood statistics like crime rates, average household income, and surrounding property values when making your decision. These will give you an idea of the potential value of your property and the likelihood that you’ll be able to keep the property occupied.
Once you’ve found the perfect property, it’s time to start rehabbing. You might think that this step is where you’ll get a chance to just relax and de-stress with demolition. In reality, this step can be even more stressful than the last. The rehabilitation process requires a lot of planning to create the perfect property for renters.
In this step, you want to prioritize safety and functionality. Create a budget before you begin, and be sure to stick to it as closely as possible. You should take into account any structural repairs that need to be made since these are both the most essential and the most expensive. Once you’ve ensured that the property is safe, then you can spend the rest of your budget on the design.
This step is what decides your success. It doesn’t matter if you picked the perfect property and did an amazing rehab job if no one is willing to rent it. If this is the case, you will have just wasted your money. To decide on an appropriate rental amount for your newly finished property, you should look at comparable properties in the area. Seeing what they were listed at when they went off the market will give you a good idea of what your property is worth.
Of course, the price isn’t the only thing that matters. You also need to find the right renters. Be sure to carefully review rental applications and do thorough research on the applicants before signing anything. You should pull the credit history of any serious applicants to be sure that they can reliably make their payments.
Refinance and Repeat
This step is what sets the BRRR method apart from other strategies. Once you’ve secured your steady flow of rental income, it’s time to cash out. Apply for a loan that’s bigger than the amount that you owe on the principal balance on your original loan. You’ll use the difference between the two as a down payment for your next rental property so you can continue to repeat this method and expand your empire.