Hey there friends!!!

You may or may not know that we’ve been on the hunt for another investment property, whether it be a flip or a property we can use the brrrr strategy on we don’t care. We’re just ready for another real estate investment!

Have you heard of the brrrr strategy? I never even knew there was such a thing as the brrrr strategy until just a few months ago when I really started diving deep into the bigger pockets forums. Here’s the funny thing though, we used the brrrr strategy without even knowing there was such a real estate investing strategy on another investment!

But now, with the actual discovery of the brrrr strategy (and of course, LOTS more research into) we’re on the hunt for another property we can brrrr.

The BRRRR Strategy

If you don’t know what the brrrr strategy is, I am by no means a professional, but since we accidentally did it once and are preparing to do it again, I do have a little bit of street cred. Right?

The brrrr strategy stands for buy, rehab, rent, refinance, repeat.

It’s pretty much what it sounds like – you buy a property, often a distressed one, dump some money into fixing it up, rent it out to a highly qualified tenant (hopefully), refinance the property for more money than you paid for it and put out in renovation costs and then do it all over again.

Sounds easy enough, right?

I’ll use our most recent example of the quadplex we were so close on purchasing… okay I shouldn’t say “so close” because the listing agent said we were “blown out of the water” by the other bids. Instead I’ll say “the quadplex we were dreaming about getting an incredible deal on.”

Anyway, at the end of July we looked at a quadplex. After the first visit we said “hell no” for a variety of reasons. Knob and tube wring, asbestos wrapped pipes, a bathroom entrance to the 4th apartment. And did I mention a man killed his wife with a hatchet in the basement? Yes you read that right, a hatchet. In the basement. So the rumor goes.

*As a fun side note, I read the last paragraph out lout to Todd and he now thinks the spirits are going to be angry with me and come and haunt me. True story.

But after doing some research and checking out what else was available in the area, I realized this property was actually a good deal, even with the $100,000+ the building needed in renovation costs. So we went back for a second time and did a more thorough inspection, an estimation of repair costs and an excel spreadsheet representing potential profit/income. The numbers looked good.

I gained some confidence to present the deal to a hard money lender who agreed it was a great deal and would fund the investment. The only catch was they didn’t want to loan the money out for more than 6 months, which means we had to find someone who would refinance the deal with a seasoning period of less than one year. This meant, I found out recently, that we can’t refinance with any institutions that sell their loans to Fannie Mae as they require a 12 month seasoning period (which means you have to own the house for 12 months.) So for us, that was the first hurdle.

Luckily we quickly found somewhere that prequalified us to refinance.

We put our offer in on Tuesday night at about 6pm, at which time there were already two other offers on it. By 5:15 the next morning we heard that the asset manager was looking at the offers. By 11am they were calling for best and final and by 1pm we heard that we had lost the quadplex to someone who offered above asking price. Oh this crazy seller’s market we’re in.

By now, you’re probably looking for the numbers of this brrrr property. We planned on purchasing the property for $135,000, (we’re thinking it wound up going for $157,000) dumping about $100,000 into renovation costs and then refinancing for about $340,000. This meant we’d be able to pull out $255,000, pay off our hard money lender for the original amount of $135k plus interest, closings costs and renovations and pocket $10,000 on top of now having $95,000 in equity in the property.

Our rental income looked fantastic as well at $3400-$3600 a month! Woah, can you say cash flow!?! Obviously I need to account for vacancy, maintenance, insurance, taxes, etc. But it is still a cash flow heavy property!

So that’s basically how the brrrr strategy works and mark my words, we will be brrrr-ing a property within the next few months. So stick around for the fun times!!

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