BiggerPockets Daily The Pros and Cons of the BRRRR Strategy
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Dec 8, 2024 Dive into the BRRRR strategy, where Buy, Rehab, Rent, Refinance, and Repeat come together to create wealth in real estate. Discover its massive potential for generating high ROI and instant equity. However, it's not without hurdles: short-term loans, low appraisals, and the tricky seasoning period can pose challenges. Learn how to avoid common pitfalls and manage rehabs effectively. Whether you're a newbie or a pro, this dialogue will help you decide if this strategy aligns with your investment goals!
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BRRRR Strategy Overview
- Buy distressed properties below market value, then rehab and rent them.
- Refinance based on the improved value (ARV) to recoup costs and repeat.
Importance of Due Diligence & ARV
- Due diligence is crucial, especially calculating ARV and rehab costs accurately.
- Banks typically lend up to 75% of the ARV, impacting your profit margin.
Successful BRRRR Example
- A property bought for $200k, rehabbed for $50k, and appraised at $335k can yield significant profit.
- This example demonstrates a successful BRRRR scenario, achieving over $80k in equity.