BRRRR

• "Buy, Rehab, Rent, Refinance, Repeat"

  • Buy a distressed or worn down property

  • Rehab by performing physical improvements where needed

  • Rent out to a tenant (long term or short term)

  • Refinance the property after 6 months of ownership based on the new appraised value of the property post improvements

  • Repeat - do it again and grow your portfolio

• This is a strategy that a lot of first time investors employ because of its simplicity. However, new investors are particularly prone to the pitfalls of rehabilitation projects and should be mindful of the time and contractor management necessary to complete a rehab. While it can be a great strategy with low barriers to entry in some markets, inexperienced investors should be cognizant of underestimating expenses involved with flipping a property. Moreover, investor partners, such as contractors, are crucial to your success, so be prudent in building your team to work with. 

Short Term Rentals

• Renting out your property for less 30 consecutive days to the same tenant

• Short term rentals have the probability of achieving higher cashflow versus long term rentals, depending on the area and the demand of the property. However, there may also be additional costs for the high turnover of your units, and platforms such as Airbnb and VRBO may charge fees or or have limited recourse for property owners in the event of issues. Also be sure to check with your local jurisdiction on laws pertaining to short term rentals, as many have implemented fees or restrictions around short term rental properties.

Long Term Rentals

• Renting out your property for anything longer than 6 consecutive months to the same tenant

• Long term rentals can have greater stability due to longer-term leases and lower turnover. They can also require less constant maintenance depending on the quality of the product. In other words, a unit that you have to clean and "flip" multiple times a month may be more work than a unit you have rented to the same tenant for a year. Note also that cash flow may be lower, as stated above, but could be more consistent than for short term rentals. However, costs to turn units over from one tenant to the next will likely be higher due to increased wear from a longer duration occupancy.  

Equity Stripping / Cash-Out Refinance

• If you have made improvements on a property or your property has appreciated in value over time, you can consider using the cash-out refi to pull equity out of the property. 

• This process is similar to when you get your first mortgage from a lender: the bank will appraise the property and give you a portion of that value (likely between 60 and 75%, depending on the property, the bank, and other factors). If you bought and improved a property, you will likely have to wait six months before you can do a cash-out refi. Refinances also come with bank fees and other obligations, but the equity can be redeployed for other projects or investments, and you do not get taxed on the equity you pull out from a refinance.