Written by Lewis Ridley
Updated over a week ago
If you’ve been investigating the property marketing looking for strategies to make your money’s worth, you may have come across the BRRRR method. But what is it and how can you use it?
In short, the BRRRR strategy stands for buy, refurbish, rent, refinance, repeat. It is a good strategy that enables investors to recycle their money after each deal. You can build up a substantial portfolio quickly using this method.
This article will dive into the BRRRR in more detail so you can start using it to fuel your property investment journey. Let’s jump straight in.
The strategy itself is very simple. However, you still need to have your wits about you and should always have someone more knowledgeable to consult if you get stuck at any step in the process.
Here’s what each step involves.
The first step in the BRRRR strategy is buying a house in the first place. This isn’t going to be any old house either. You need to get a house that needs a bit of a refurb.
This is because you want to get a property that is being sold below-market-value (BMV). This way, you can make your money stretch further by getting a discounted property. Also, the rest of the strategy won’t work unless you can add value to a property.
You can find fixer-uppers at auctions or through using platforms like Property Market Intel, which has filters for properties in need of a refurbishment.
You can get funding for refurb projects but you’re better off having cash available for the purchase. This will facilitate a quick sale and you may be able to get a steeper discount if you can close the deal quickly.
If you want to learn more about how to find and finance refurb projects, see our knowledge centre now.
The second step in the process is to refurb the property to a good standard. You don’t have to go overboard and spend tons on renovations. Just modernise the property and keep it in line with the rest of the area.
A common error for newbies is to add loads of new features and spruce the place up too much. This takes more time and money then it’s often worth. You’re better of refurbing to a similar standard to neighbouring properties.
The trick here is to get the right contractor. Ask around investor networks and find someone who is reliable and get the job done to a high standard. The last thing you need is a delayed project that doesn’t get finished properly.
We have a lot of guides on our knowledge on how you should refurb a property. Check them out now.
The third step is to find a suitable tenant to occupy the property. Now you have refurbed it, you’ll want to start capitalising on that monthly recurring income.
Understanding how you’ll rent the property is also important in the early stages. You’ll want to check the area to see if there is demand for rental properties. Otherwise, you’ll be left with an empty house.
Make sure you are careful in choosing your tenants as well. You want to property vet people letting them stay in your property, especially since you’ve just spent a ton of money on refurbing the place.
Property management companies come in useful here. They can find the tenants and manage the day-to-day, so you can focus on your next investment. See how much management companies charge for these services here.
If you really want to squeeze the most out of a rental property, opt for a HMO. These can be rented out by the room and allow investors to get more money from the same house. However, bear in mind you may need planning permission from the council to convert a property into an HMO.
The next step is pull out your money with a refinance. This can be a tough one as you’ll have to through a bank or a broker to find a lender who will place a mortgage on the property.
The trick here is to go through a broker and get in touch with as many lenders as possible. You’ll want to make sure you contact them once you have the new valuation in so you can pull all your money out and a bit extra. This will allow you to go ahead and start your next project.
If you want to learn more about refinancing a property, see our guide here. The process is sometimes scary but is actually pretty simple if you have the right help.
From here, if the refinance has gone well and you’ve pulled out a substantial amount of money, you can now repeat the process.
You can use the money you’ve pulled out to put a deposit down on your next project and start the process all over again. As you build up your reputation with lenders and contracts, the process should become easier and easier.
You’ll start to sharpen your skills, pick better deals, and can even start building out a team. It’s important to start tracking things here as well so nothing is missed. You want to learn from each experience, so you keep getting better.
It’s worth noting as well that you can refinance before you get a tenant in the property. It depends on what financing you’re using to secure the property in the first place.
If you’ve used bridging finance, you will need to refinance before putting in a tenant because the loans are short-term in nature. If you’ve secured the property with cash or a mortgage, you can rent before refinancing if you want.
It also depends on when you want to start making monthly income. To learn more about the financing options for BRRR strategies, see our knowledge centre for more.
The BRRR is relatively simple when taken on face value. Of course, with most things in property, there a number of small details that can trip novices up.
Keep doing your research with some of the other articles we have in our knowledge centre and keep learning. However, sometimes the best way to learn is by diving in. Start looking for properties, get in touch with brokers, and start getting stuck in.
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