Buy, Refurbish, Refinance, Rent (BRRR) Strategy Explained
Investors use the Buy, Refurbish, Refinance, Rent (BRRR) Strategy for creating a lucrative investment. This blog explains what the strategy is, and its pros and cons.
If you want to know about the BRRR Strategy and how it can help you with your investments, just keep reading!
When you buy a property, you put your money in and leave it at that. The BRRR strategy entails that you buy a property (a low-value property), you refurbish it to increase its value, refinance it; pull your money out of it, and then rent the property.
This strategy is different from a buy-to-let investment and has its pros and cons.
Pros of BRRR Strategy
In a conventional property investment, you receive a traditional mortgage. In a BRRR strategy however, you can avail a ‘bridging finance’ loan that basically bridges the gap between you buying a house and getting a mortgage. You can buy a house with cash using the bridging finance and then get a mortgage after a few months, called a re-mortgage or a refinance.
The great thing about the BRRR strategy is that you can get your money out by pushing the value of the property up. When you avail the bridge loan, and refurbish the property, you increase its value. Now, you can get a good mortgage on the property with the higher value. You can use this mortgage to pay yourself back for the initial purchase of the property and the bridge loan.
You Can Get The Best Deals With The Bridging Loan
When you buy a property with cash/bridging loan, you can get the best deals out of it. You can buy a property for cheap, refurbish it, push its value up, and then refinance it.
Many a times, banks do not lend for properties that may be inhabitable; however, with a bridging loan, you can use the money to develop a good kitchen, bathroom, porch, etc. push its value up, and get a good mortgage on them. This is a smart way of buying properties.
Use The Same Amount Of Money To Grow More Money
Another great pro of this strategy, is that you can use the same, small amount of money to grow more money. See, when you buy a low-value property, you’re investing little in it and then use a bridging loan to push its value up. Then, through the refinance, you pay yourself back, repay the bridging loan and get more money out of the investment. You can utilize this money to invest in other properties to grow more wealth.
Cons of the BRRR Strategy
These are a few cons of the BRRR strategy:
Very Hard Work
BRRR strategy involves hard work—you spend a good time finding low-value properties that you can avail a bridging loan for. Then you refurbish the property and get a bunch of contractors involved. Afterwards, you refinance it, get a mortgage. All of this involves hard work and is not as straightforward as investing in a buy-to-let property.
Again, the BRRR strategy involves hard work, more time, energy, and knowledge than a straightforward buy-to-let investment. You would have to do ample research about properties and contractors, and create a strong network of people to make the BRRR Strategy work for you. However, if you do it right, it is very lucrative.
The Buy, Refurbish, Refinance, Rent (BRRR) Strategy is an investing strategy used by many investors. This blog explained what the strategy is, and its pros and cons.
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