![]() The big bonus is that the investor now has a stable, long-term rental property with $40,000 of equity at the start. ![]() This would pay back the investor’s entire short-term loan and most of the rehab cost. If the new lender’s appraisal came in at $160,000, the bank might give 75% of that amount in a new loan, which is $120,000. Then, they would refinance the property with a new loan from a lender. An investor could use a short-term loan to buy the property (like hard money) and their own cash to rehab the place. The property needs a $25,000 rehab to be rent-ready, for a total cost of $125,000. Therefore, for an investor to get enough to refinance the entire short-term loan and possibly recoup the rehab money, the property needs to be worth significantly more than what it was purchased for.įor example, let’s say a property sells for $100,000. When a person goes to refinance such a property, a bank will typically only refinance up to 75% of the new value. Of course, as with all investments, the math has to work for the strategy to work, and there are many BRRRR pros and cons to consider. The investor finds another property and builds wealth.The investor secures a loan to cover the purchase price and rehab cost. ![]() The investor finds a tenant for the property.The investor fixes up the property, building its equity.The investor looks for and purchases a distressed property with potential.And then, the investor does the whole process over again with a new property. The owner then obtains a refinance on the property to pay off the short-term loan and turn the property into a stable, long-term, cash-flow-positive property that continues to build equity. Then, after the property has been finished, it is rented out to a tenant instead of sold. In BRRRR real estate investing, the property is treated like a fix-and-flip, using short-term financing such as private money, hard money, a home equity loan, or cash to acquire and rehab. It’s a method by which real estate investors buy distressed properties, but the difference is the intention to keep them as rental properties instead of selling them. BRRRR stands for buy, rehab, rent, refinance, repeat, and it is a great way for investors to earn passive income. Many investors have fast-tracked their real estate business with the BRRRR real estate strategy.
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