B u y : R e h a b : Re n t : R e f i : R e p e a t From Andrew Syrios Investing in real estate, particularly holding real estate, is the best method available for a person of modest means to become wealthy in my opinion. That doesn’t make it easy to do, however. Buying and holding real estate requires a lot of very different tasks be done right in order for it to be successful. When put simply, there are five major components: 1. Acquisition 2. Financing 3. Rehab 4. Property Management 5. Maintenance
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The BRRRR method stands for Buy, Rehab, Rent, Refinance, Repeat. However, there are two financing stages; up front when you purchase (using either cash, a private loan, bank loan or hard money loan) and then on the back end. The idea behind the strategy is to “flip” the property to yourself. Basically, you buy the property with at least 25 percent equity, so when you refinance, you can refinance at appraised value and pull out all of the money you put into the property up front (or payoff the loan). When done right, you effectively get a property for free. But let’s return to the five key aspects of buy and hold and go over each briefly:
1. Acquisition In real estate, you make your money when you buy. Unfortunately, there’s a tendency for buy and hold investors to get lazy. Flipping creates discipline by quickly showing whether a deal was good or bad based on how much money you made or lost on the sale. This doesn’t happen with buy and hold. While there is an appraisal, it’s very tempting to write it off as a “bad appraisal” if it doesn’t come in where you think it should. Thus, it can be easier to justify lower quality deals. Don’t fall for this trap. Bad deals on the acquisition side will hurt buy and hold investors
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