Real estate investing can be a one-and-done deal or a strategy with more work but potentially higher profits. If you’re an investor looking for ongoing passive income, the BRRRR method may be a good option.
The BRRRR method means you buy, rehab, rent, refinance, and repeat. It’s a cycle to build a robust real estate portfolio by purchasing undervalued properties using the equity of an existing investment property, renovating the new property, renting it out, and repeating the process.
But does the BRRRR method work? It does, and here are five reasons why.
1. Leverages Your Real Estate Investments
If you own a property with equity, you can leverage that equity to grow your real estate portfolio. Refinancing an existing property to use the equity provides the capital needed to purchase and renovate another property.
This means you leverage your initial investment, putting the money to good use with the hope of high returns from the newly invested property from both capital appreciation and rental income.
Each time you use a property’s equity and reinvest the funds in another property, you amplify your earnings on the existing property while creating a potential for future passive income by renting the new property after rehabbing it.
2. Rehab Increases a Property’s Value
A big part of the BRRRR process is rehabbing a property. You purchase an undervalued property and rehabilitate it, potentially increasing its value. This could provide immediate increased asset value and allow potentially higher rental rates.
A higher property increases your net worth and potential future profits when you sell the property. It also opens more opportunities to continue the BRRRR method by leveraging the equity in the recently renovated property to purchase another property and further grow your real estate portfolio.
3. Creates Passive Income
A big reason the BRRRR method works is the passive income it creates. Initially, you must put in…