It can be a lengthy but rewarding process. Firstly, you buy a property using bank loans or hard cash; then you refurbish it to make it more livable; then you rent your property out; then refinance it. After this, you can cash out on your first rental property in order to fund the acquisition of your second.
Unlike the traditional method of property buying through financing, the BRRRR method is a quicker method for building a property portfolio and earning money on your investment.
The key to the method is buying properties under market value—perhaps by targeting properties in need of heavy refurbishment—and building equity during the rehab phase.
PROS AND CONS
One of the major issues with the BRRRR method is the potentially prohibitive expense. It may require expensive loans in order to purchase a property and further costs when refurbishing it.
Furthermore, there are always risks inherent to relying of refinance. For instance, your property could be appraised for a much lower value than anticipated, while some lenders require lengthy “seasoning” times before a lender allows a cash out refinance.
REAP THE REWARDS
Using the BRRRR method can be time-consuming and even risky, but if done properly the final product is a long-term investment in a property in excellent condition, leaving you to pick up the rewards.
Eventually, once you have invested in properties, you’ll be able to reap to rewards of economies of scale that help you lower your overall costs.
If you’re planning on investing in real estate in the Middle East, the BRRRR method may be an option for you to create a long-term passive income. Be careful, however, to check local laws on property investment to make sure you’re not falling foul of any restrictions.
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