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INVESTING IN REAL ESTATE USING THE BRRRR METHOD

Monday, December 19, 2022   /   by Rebecca Wilson

INVESTING IN REAL ESTATE USING THE BRRRR METHOD

Are you ready to pursue Real Estate investment? If you are looking for a long term strategy that will assist you in building your wealth and legacy, we have the plan for you.

Breaking Down the BRRRR Method.

1. BUY - Find a property that is a worthwhile investment. In order for the strategy to be successful you will need to find a home that is undervalued or its value can be significantly increased with renovations. There are a number of ways to find these properties. Our home buying specialists can provide you with information on how you can obtain a property for a good value. 

You will also need to ensure that you can finance the project. Some properties may require different lending options because they are seen as an investment or are in need of repairs. Speak with your mortgage broker to ensure that you have the proper financing plan in place before purchasing a property. 

2. REHAB/RENOVATE - Determine what improvements need to be done and move quickly. The faster the upgrades can be completed the lower the cost and the faster you can begin earning cash on your investment. Remember if you are planning on using the property as a rental, it may not need all of the higher end finishes that you would normally put into a flip. 

3. RENT - Once the renovation is complete, you can rent the property! Keep in mind that being a landlord comes with rules and regulations. Be sure to do your due diligence on what owning a rental property entails so that you are well informed. Knowing your rights and the rights of your tenants will help you keep as much value in the property as possible. 

4. REFINANCE - Now that you have increased the value of the home and have a record of rental income for several months, you can begin the process of refinancing. Once you refinance the home (typically lenders will only refinance to 80% of the current home value), you can now use those funds as the down-payment for the next property purchase. 

5. REPEAT - You can now roll your initial investment into a new investment property and begin the process all over again. If you did a good job, your initial investment will fund your next investment. If you did a really great job, you should have additional profit left over that can go into your pocket or also be reinvested.

Here is an example:

Harvey's Realtor finds Harvey a great 3 bedroom, 1 bathroom investment property to purchase in the heart of a city, near transit, shopping and schools. The home is in need of some repairs and renovations but once it is fixed up it will have great rental appeal. 

Purchase Price: $500,000

Down-Payment Amount (20%): $100,000 

Cost of Renovations: $60,000

Total Initial Investment: $160,000

Monthly Holding Costs: $1900 (Mortgage and Property Tax)

Monthly Rent Charged: $2600 + Utilities

Total Monthly Cash Flow: $700

After a few months of rental income, Harvey refinances the property.

The home is now worth $725,000,

The bank refinances the mortgage at $580,000 (80% of the value). 


Harvey pays himself back his initial investment of $160,000 and has $420,000 left over to reinvest into his next project.

New Monthly Holding Costs: $2550 (Mortgage and Property Tax)

Monthly Rent Charged: $2600 + Utilities

New Total Monthly Cashflow: $50....

Don't be discouraged that the new monthly cashflow is only $50. Harvey now owns a home worth $725,000, the bills pay for themselves. Harvey can use the $420,000 he was able to pull from the property and add to his portfolio yet again, increasing his net worth.

If you are looking to get started on your investment journey or are looking for advice on different investment strategies, we would love to speak with you.

The Wilson Realty Group | Keller Williams Edge Realty
3185 Harvester Rd Unit 1
Burlington, ON L7N 3N8
905-963-7355

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