MY FIRST BRRR (BUY-REHAB-RENT-REFI). That turned into a Flip.

If you haven’t heard about the BRRR strategy today is your lucky day. I like to think of the BRRRR strategy as you are flipping the property to yourself. It is simply this.

Step 1: Purchase a property. They key though is buy a under valued property. You want something that you can add equity to quickly.

Step 2: Rehab and update the property (add the value to the property)

Step 3: Rent out the property

Step 4: Refinance the property and pull money out.

The bonus step – REPEAT

I had heard about this strategy for awhile now. Lately I have been looking for ways to grow my portfolio quickly and reach my financial freedom number sooner. I decided to give this a shot. The reason being is lets say you have 30k. If you bought something turnkey with no add value potential you end up with 1 property and your 30k tied up in that property. Now, if you bought a fixer upper/ something that is under valued with that 30k you can now pull that 30K back out of the property once you have fixed it up. In a sense keep “Recycling” that 30k to acquire more properties.

Below you will find the numbers and details on my first BRRR and actually my first out of state investment (That could be another post in its self ). Short answer numbers seemed to be a lot better than my current location and less expensive to purchase a BRRR/ Property to get started.

Numbers and Details:

Location: Indianapolis

Purchase Price: $57,500

Loan: Conventional with 20% down ($11,500)

Loan amount- $46,000

Rehab Cost- $16,000

Total rough out of pocket costs – $27,500

Estimated ARV (After Rehab Value) – $90,000-$100,000

Note: right before we filled the home with a tenant at $950 a month. We accepted a offer to sell for $97,000. Below though are the numbers if we had continued the BRRRR strategy.

New Loan amount would had been after refinancing – $72,000

Cash back in my pocket after refinancing – $26,000 (so I basically would have gotten a remodeled rental property for $1,500)

Rental Numbers:

• Gross Monthly Income: $975
• 5% vacancy – $48
• 10% property management- $97
• Utilities-$ 50
• 8% Maintenance – $80
• taxes- $80
• Insurance-$55

Net – $565

Mortgage -$380

Profit – $185

BEFORE:

AFTER: