How To Find The Right Property For Your BRRRR

Putting the Buy into BRRRR Real Estate Success

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 use this method 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. Here’s how to become an expert prospector for your diamond in the rough…

Location, Location, Location:

• Target rising neighborhoods: Up-and-coming areas with good schools and job markets tend to see steady rental demand and property value growth.
• Avoid declining areas: While cheap, properties in declining areas struggle to attract tenants. Finding a good property in the wrong town or neighborhood will hinder your ability to make money, no matter how great your renovation is. It’s important to look in neighborhoods where you know tenants are interested in renting, and finding distressed or run-down properties there.

Seeing the Deals:

• Look for distressed properties: One way to get a great deal is to look for properties that are in foreclosure or owned by a bank. Often, these properties are sold at a steep discount to account for the increased risk and unknown issues within the home. Learn more about sourcing properties through foreclosure auctions.
• Direct mail campaigns: Reach out to absentee owners who might be open to selling. If you don’t have time for this, connect with the people that do—wholesalers.
• Driving for dollars: A good 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 Backflip Analyzer will immediately let you know if it’s a good deal.
• Listings with low-quality photos: Properties that are listed with low-quality photos usually point to a home that is heavily outdated or in disrepair.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. Look beyond the photographic state of the home and see the potential.

A Numbers Game:

• Know the After Repair Value (ARV): Research comparable properties in good condition to estimate post-reno value.
• The 75% Rule: 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) —some people advise 70%.
• Rehabilitation Costs: Factor in renovation costs while considering potential upgrades that boost rental income (e.g., extra bathrooms).

Teamwork:

• Network with local agents: Investor-friendly agents can provide valuable insights into the market and unearth hidden opportunities.
• Build a contractor team: Having reliable contractors is crucial for keeping renovation projects on time and within budget.

By following these steps, you’ll be well on your way to finding the perfect BRRRR property and building a thriving real estate portfolio with this long-term strategy. Remember, due diligence is key. Always conduct thorough inspections and have a clear understanding of renovation costs before diving in. Happy hunting!