The BRRRR Method (Buy, Rehab, Rent, Refinance, Repeat) is a common real estate investment strategy that involves rehabilitating a run down property, renting it out, then refinancing it to fund future rental property investments. Many investors like using this method because it’s an excellent way to maximize their capital, and quickly put their money back in their hands.
Let’s take a closer look at the first step in the BRRRR strategy: ‘Buy’. What makes a strong BRRRR property? As a general rule, investors should be buying in markets where their purchase price and rehab are no more than 75% of the ARV (After-Repair-Value).
The key to a successful BRRRR is to buy properties for less than they’re worth, which is why we’re sharing 3 ways to identify potential properties where you have the best chance of doing so.
Look for distressed properties
One of the easiest ways to get a great deal on a property is to look for ones that are in foreclosure or owned by a bank. More times than not, these properties are sold at a steep discount to account for the increased risk and unknown issues within the home. Investors can also look to foreclosure auctions or even estate sales to find these deals.
Learn more about sourcing properties through Foreclosure Auctions.
The listing has low-quality photos
While casual buyers may scroll right past these listings, they can be a gold mine for real estate investors. Properties that are listed with low-quality photos usually point to a home that is heavily outdated or in disrepair. Additionally, it may be a sign of a seller that is economically motivated to get the property off their hands and will accept an offer below ask. If you can look beyond the current state of the home and see the potential, it may be a property worth investing in.
Focus on strategic locations
Location is an important aspect of any real estate purchase, but especially when it comes to BRRRR. Finding a good property in the wrong area will hinder your ability to make your money back, no matter how great your renovation is. It’s important to look in good neighborhoods where you know tenants are interested in renting, and finding distressed or run-down properties there.
A great way to scout out these properties is by driving around various neighborhoods and using the Backflip app to instantly analyze a property. When you find one that you think meets your buy box, the analyzer will immediately let you know if it’s a good deal, or if you’re better off passing on it.
It’s important to remember that the BRRRR method is a long-term strategy, and comes with a certain degree of risk. However, potential issues can be mitigated with the proper research and due diligence. To identify an investment property that is ideal for this method, investors should use the above tips to ensure they’re taking on an optimal investment in a strong rental market.