1. Take This BRRRR Method Approach to Accumulate Multiple Real Estate Investment Properties in Today’s Market
Before we move on to the importance of the BRRRR method part of the blog, let’s talk about what’s happening in the current market or real estate, especially in the United States. With inflation, an impending recession, and housing prices rising at a significantly faster pace than wages, the current state of the world has created the perfect storm for skeptics to doubt the cash flow opportunity of real estate.
As a result, while everyday Americans have begun forfeiting their dream of accumulating wealth through an ownership portfolio, investment firms have become the biggest new buyers of U.S. homes. There is a clear reason why firms have made up a record 28 percent of single-family home sales in just the first quarter of 2022.
The reason is opportunity. As housing prices go up, the rental market increases. This means that investors who are willing to leap to invest in their first or next property will be introduced to a financial vehicle that offers them a continuous cycle of funds.
Despite what many believe, the best part is that you do not need to own an investment firm, come from money, or have a high-earning job to take this strategic approach to real estate. So here comes the most famous approach known as the BRRRR method.
No matter where you are financially or your doubts about the market, I am here to tell you that it is possible to accumulate wealth in real estate today using the BRRRR method. Many of us started at ground zero, and did not come from money, or have tens of thousands of dollars sitting in our bank accounts.
Here is how:
2. Aim for Affordability, Instead of Perfection
When it comes to purchasing property, people often want the newest and best-looking home on the block. They want it move-in ready, with little to no renovations and the thought of having to handle tenants scares them. But how do you protect yourself from the worst that can happen? I say always be an informed investor.
Knowledge and creative thinking will get you a long way in real estate. There are opportunities to purchase real estate within your price range if you know how to search for properties outside the most common sources. If we follow the BRRRR method, it guides you that you should: Begin with distressed properties – foreclosures, real estate-owned properties, or short sales – that you buy below market value and intend to fix up. Distressed homes are all around you; it just takes some research and networking to find them. A seller may have to sell quickly because of a job change, divorce, or death in the family. Other sellers might be tired of being landlords and just want out.
I have found that many properties tend to be in good condition and only require minimal repair. These renovations are also expenses that can be taken care of through loans. Under-market value properties in good condition provide the opportunity to amass several other homes that are similar.
3. Know That the Best ‘R’ of the BRRRR Method is ‘Refinance’
Traditionally when you buy a house, you pay a down payment and do not get the money back to leverage for other goals. You have to save up for another down payment to purchase your next property. But with the BRRRR method approach, you have the option to refinance, get back your initial capital, and utilize the down payment amount that was initially invested to pay for another property.
I discovered the BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) in 2009 when I had to refinance from a high-interest predatory loan. Before that, I leaned heavily on my credit card to fix up the properties I bought. With this new approach, I was able to refinance my property and pay off other expenses such as car payments.
Because the method allowed me to get the initial investment back, my investment strategy became buying distressed houses on credit cards, refinancing them, paying my cards off, and then using them again to purchase more.
4. Leverage Your Infinite Money Source By Following BRRRR Method
Your first investment (what I call your first infinite bank) will become an ongoing source of income for years to come if you buy it and hold it. Regardless of its level of perfection, your purchase will create a monthly cash flow from tenants whose rent payments will eventually pay off the mortgage. As your property increases in value over time, you’ll have the ability to withdraw from your “bank” in the form of a home equity loan.
After a thorough study of the BRRRR method, I would suggest putting the money in a policy that will compound it by 4%, and getting a loan against the policy to buy another property. This infinite money source means that your equity grows through multiple streams: the first house you purchased, the policy, and now the second home, continue to fund your bank with the equity gained from your properties. This rinse-and-repeat process is the most accurate definition of learning how to bank on yourself.