There are countless ways to make money through real estate, from building brand-new homes on vacant land to huge multi-family apartments. Entering the world of real estate investing is intimidating for most, but it does not have to be! We are here to tell you what we feel is the easiest and safest way to start investing in real estate.

The BRRRR strategy was coined by the hosts of the Bigger Pockets podcast, though investors have been using this strategy long before it had an official name. This proven strategy is meant to be used to start your rental portfolio and keep adding to it. BRRRR stands for Buy, Renovate, Rent, Refinance, Repeat. 

Buy

The first official step in the BRRRR strategy is buying property, though there are a few more steps you should take before purchasing in order to secure a great investment. Investors must get familiar with the markets they want to invest in. It is important to have a solid understanding of the rental and resale markets, the cost of renovations, the cost of applicable HOA fees and/or taxes, and if there are any lease restrictions in your target neighborhood. You could spend hours and hours getting a good handle on the market, or save yourself the time and just find yourself a great Realtor (or Realtors in this case) with extensive local market knowledge who can do the hard part for you!

After you choose your target markets, it’s time to think about financing. There are a ton of ways to get creative when financing an investment property, so. it is important to have a good lender to give you some different options. The lowest-cost option is to buy something as your personal residence and live in the property while you renovate it!

With the BRRRR strategy, it is important to choose a lender who offers a cash-out refinance option. We’ll get into that later!

Now it’s time to start locating potential investment properties. This strategy can be used on single-family homes, condos/townhomes, and multi-family properties. How do you decide which one to choose? It all comes down to your budget,  plans for the property, and personal preference. If you want to Airbnb or just have flexible rental options, a single-family home might be best for you. If you want something more low maintenance, a condo or townhome in a good HOA could be a great option. If you have the budget, and more people do than you might think, our favorite option is multi-family.

Pro Tip: When purchasing a multi-family home, lenders will leverage the future income you will make from the property against the loan, making you qualify for more than if you bought something single-family!

When looking at a specific property, it is critical to know what the ARV, or After Repair Value, is and have a good estimate for the cost of those repairs to make sure you are making a wise investment.

Renovate

Everyone loves a great deal, but it can truly make or break an investment- and we’re not just talking about the purchase price. It is so important to prioritize projects based on your plans for the property, and make sure you are getting the best possible price for each one.

It is not always necessary to fully renovate a property, and there are often inexpensive upgrades that can add a LOT of value.  The extent of renovations depends on the property’s condition and your plans for it. If you are planning to use a home as a luxury Airbnb, you are going to have to spend a bit more than if you plan to spruce up a condo to be an annual rental.

Once you decide what projects you are ready to start, it is time to start getting quotes. You should get two or more quotes for each project to ensure you are saving the most money. If you’re handy and have the time, you may want to consider taking on some small projects yourself, like painting and adding some decorative landscaping!

Rent

Now it’s time to start making some money! You can either find a tenant yourself, hire a Realtor to find and screen a tenant for you or hire a property management company to handle everything for you! A Realtor can help you find a tenant, run a background check, get the tenant approved with the HOA (if applicable), and write up a lease for you. Then, they hand the reigns back to you! In this scenario, you will have direct contact with your tenant and be responsible for collecting rent and scheduling repairs. If you choose to hire a property management company, they will perform all of the tasks a Realtor would and then some! They will collect rent, be the tenant’s main contact and schedule any necessary repairs. Of course, this option will cost more than using a Realtor.

Refinance

Refinancing will depend on the type of loan you secured and the amount of value you have added to the property. Ideally, your renovations will have added value to your property, making it worth more than when you bought it and adding to your equity. That means you will be able to do a cash-out refinance and take out some of your equity as cash in your pocket!

Sometimes, a cash-out refinance isn’t the best option- and that’s okay! For example, if you paid for the property with an FHA loan, you can use your new equity to refinance into a conventional loan and drop that pricey PMI, or Private mortgage insurance, that has been cutting into your profits!

There are a few different ways to refinance so it is important to talk to a great lender who can go over all of your options and find the best one for you!

Repeat

Congratulations! You now own your first rental property that is bringing in passive income every month. You may also have some extra cash on hand from your refinance! Now it is time to find your next property and do it all over again. In no time at all, you will have your own real estate investment portfolio that is bringing in income and growing your equity!

Whether you have questions about investing, or you are ready to get started on building your investment portfolio, we are here to help! We have extensive knowledge of our local markets from South Naples to Cape Coral. We even have our own investment properties right here in SWFL that we have used the BRRRR strategy on. We will be there every step of the way and help you make sure you are making a great investment.

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