BRRR is an acronym that has been given to an investment style used by investors for years. The ‘B’ stands for buy. The first ‘R’ is for rehab or renovate. The next ‘R’ is for rent. And the last ‘R’ is for refinance. You will occasionally see a fifth ‘R’ added to represent repeat or resale. Nifty acronyms aside, we’ll walk through each step of the BRRR strategy and point out some of the things that you should keep top of mind.
Not every property will work, and not every real estate market is optimal. It is important that you use comps from Seattle properties that will be competing with your property once the renovation is complete…similar to purchasing a potential fix and flip. You should never use an outlier property to determine value, no matter what type of investment you are looking to complete. Simply looking for a low purchase price on a property without doing your homework won’t get your investment strategy off to a good start.
Two situations can quickly diminish profit and cause delays in your BRRR strategy … the rehab taking too long and the rehab going over budget. Project management here is key. If you do not have experience with this make sure that your contractor does. The last thing you want is to pay more interest on your financing and delay cash flowing tenants from moving in because you didn’t have a comprehensive scope of work in place and the means with which to execute.
This one is easy … if it takes you a long time to get rent-paying tenants into the property, that will create an obvious cash flow issue. Before you purchase the property, look at the vacancy rates and time to rent data in your target market. A property management company can help you here. Having a good property manager on your team should be part of your long term investment strategy.
Don’t wait too long to obtain your long term financing. Ideally, this should be in place before the property purchase and renovation. Not being able to refinance may cost you the whole deal and you could possibly lose quite a bit of time and money invested to that point.
We’d love to sit down with you and discuss your investment strategy. At CIVIC, we have several financing options available for both short and long term investment goals in Seattle. Give us a call at 425-385-9014 and lets get started!
Also Check Out: Questions That Investors Should Ask Their Realtors