Does the BRRRR Method Really Work?

Making the decision to invest in real estate is a great way to start diversifying your portfolio and growing your wealth in a sustainable way. However, to be successful as a real estate investor, you’ll want to use the right method to manage your money and transform distressed properties into in-demand rental homes. While there are dozens of strategies you can use, one of the best methods is known as the BRRRR method. Whether you’re looking into Beverly Hills or Encino real estate, here’s what you need to know about this simple way to structure your real estate investments so you can start seeing profits more quickly.

The BRRRR method is a way for real estate investors to create a sustainable and growing business. It helps them maximize the number of properties they acquire in a short timeframe while helping them earn profits on each property they invest in as quickly as possible.

BRRR stands for “buy, rehab/renovate, rent, refinance, repeat.” These are the steps that investors will need to follow to make the method work for them.

The BRRRR method works so well because it works in stages and acts as a structured plan for investors to follow as they grow their businesses. However, making the method work for you as you invest in Encino real estate involves understanding the work required in each step.

Of course, as a real estate investor, the goal is to buy properties for as little money as possible. Doing so increases your profit potential and ensures that you’re spending less of your personal funds to purchase the properties.

Typically, investors will want to buy properties that need a little renovation work. These homes tend to be priced lower than move-in-ready properties, keeping your overhead lower. That said, it’s best to choose homes that only need a moderate amount of work. You don’t want to sink all of your liquid funds into renovations that will end up costing you more than you’ll make when you rent the property out.

The renovation portion of the BRRRR method is how you get the home up to move-in-ready standards. If you’re handy, you can manage the renovations on your own. However, if you’re not confident in your renovation skills, hiring professionals will ensure that you’re able to bring everything up to code. This is better for your wallet in the long run, as it can increase the amount that you’ll be able to sell the home for in the future.

Once the home is renovated, the next step of the BRRRR method is to find a tenant to rent it from you. The sooner you can find a tenant, the sooner you can start recouping your money. The key is to price the rent competitively with other properties in the area but to set that rent amount at a high enough number to cover your mortgage payment, property tax, maintenance expenses, and any other routine costs without forcing you to dip into your savings. The exact amount you can charge will depend on the property itself and its location. If it’s in a high-demand location, you’ll likely be able to charge higher rental amounts.

Once the home is in better condition and you’ve made payments on your home loan, you’ll start to build equity in the property. The more equity you have, the more you can borrow against the property by refinancing your original mortgage. Most real estate investors pursue a cash-out refinance, which allows them to borrow the equity they’ve built up in the home. They then use that cash to purchase another property.

The point of the BRRRR method is that it helps you create a sustainable business model and makes growing your portfolio of properties easier. Once you complete the first four steps, you can repeat the process over and over until you’re happy with the number of properties you own or are ready to sell and cash in on your investments. This strategy is an effective way to build long-term financial gain.

The BRRRR method works well for both new and experienced investors. If you’re considering incorporating this method into your investment strategy, here are a few of the benefits you can expect to see.

With the BRRRR method, you use the equity from homes you already own to purchase and rehab new properties. This allows you to avoid using your personal capital and enables you to preserve your savings without forcing you to sacrifice your business’ growth.

The longer you own a property and the more you pay down any home loans used to purchase it, the more equity you’ll build. Over time, you can use the equity in each home you own to cover maintenance costs, purchase additional properties, or cover other expenses. Since the BRRRR method encourages you to keep each investment property and rent it out rather than sell it, you’ll continue building equity year over year.

Though the BRRRR method has many benefits, it’s not without its downsides. Here are a couple of cons of using the BRRRR method to purchase Encino real estate.

Renting out a property to tenants takes a lot of work. If you manage the property yourself, you’ll be in charge of collecting rent, taking care of repairs, and overseeing the entire process. This takes time and can interfere with your other pursuits.

As with any investment, there’s no guarantee that you’ll make a profit using the BRRRR method. You’ll still need to proceed with caution and carefully research each property you’re interested in before making an offer. You want to ensure you’re making wise financial moves at every point.

Using the BRRRR method is an excellent way to start investing in properties, but you still need to make sure you’re choosing top-tier homes that will attract tenants. The best way to do that is to work with an experienced real estate agent who knows the ins and outs of the investment game. If you’re ready to start looking for fantastic investment properties, schedule an appointment with Mark Rutstein of Iconic Homes LA today. From Bel Air and Studio City to Holmby Hills and Encino real estate, this is the team you want on your side.

_{*Header photo: 959 N Alpine Drive, Beverly Hills, CA 90210, sold by Iconic Homes LA}