Ever since the onset of the COVID-19 pandemic, industries around the world have been struggling to rebound while finding their footing in a new marketplace. The housing market has not been safe from the impact of the pandemic, as renters and buyers alike have watched prices skyrocket dramatically. Investors in the real estate industry are understandably questioning where they all fit into place and if the methods they used in the past will still be relevant in this new marketplace.
Investors in the real estate industry have long abided by the BRRRR Method; an acronym that describes a thorough and detailed investing process.
With the pandemic still bubbling and the housing market in flux, is the BRRRR Method still an actionable approach to real estate investing?
Let’s take a closer look at how the marketplace has changed, what investors need to do, and how the BRRRR Method can help everyone accomplish their goals.
The BRRRR Method: What’s In A Name?
Investing can be easy when you know a process that works, right? The BRRRR Method is exceptional at simplifying what could otherwise be seen as a complicated process. In order to better understand this method of investing and whether it will still work in the post-pandemic marketplace that we are presently in we should separate each letter into its individual components.
Buy – The first step of the BRRRR Method is simple: buy a property for nothing more than 70% of its After Repair Value. The After Repair Value of a property is also known as its ARV. This number is incredibly important as it will often be the deciding factor in how much (if any) profit that you generate.
Rehab – The BRRRR Method for fixing and flipping homes includes budgeting for rehabilitation. Making the necessary repairs to bring your investment property up to market standards is important. You’ll want to work through someone like Hard Money Lenders AZ to get the capital necessary to rehabilitate your property. It is the rehab process that eventually decides the outcome of your fix-and-flip project.
Rent: Market and get tenants into your property. This will not only start generating income, but also give banks confidence to help you with the next step…
Refinance – At this point in time, you should be ready to get out of your hard money loan so that you can reclaim capital and pay back investors. By accomplishing this vital step, you are ready to take on the next and most important part of the process:
Repeat – The BRRRR Method wants to set you up for success and that means creating a method where you can repeat what has worked for you. With funds in hand yet again, you can go ahead and reinvest in a different property in order to repeat the BRRRR Method. As you repeat the cyclical method, you’ll improve your skills, build your portfolio, and generate a sizable chunk of passive income.
How Does Today’s Market Impact the BRRRR Method?
If you are looking to buy into the real estate market, you might want to hold off. If you are looking to invest in fix-and-flip properties, now might be the right time – but you’ll need to act with caution.
Current housing prices are at record levels and this fact is buoyed by a looming recession, leaving individuals worried about how and when to spend their budget. Unfortunately, surfing through various MLS services will only yield the on-the-market results that are priced to turn into losing investments.
There are a few ways you can adapt the BRRRR Method in order to function successfully in today’s marketplace.
Look For Privately Marketed Properties
If you want to make waves as an investor with the BRRR Method, you might want to get creative. Instead of paying the premium that most houses on MLS platforms are listed at, surf the private marketplace for properties that you can acquire at a better value.
Included in privately marketed properties are
- Estate Sales
- Sheriff Sales
- Real Estate Agents
- Public Records
By utilizing these sources of information, savvy investors can make their way to potential winning investments. All that they need to do is apply some effort while staying focused on the end goal. All it takes is one property to get into the swing of things. Take advantage of the tools and technology available to you to make this search as profitable as possible.
Benefits of Privately Marketed Properties
When shopping for potential properties to invest in through the BRRRR Method, current investors will find that prices are inflated and have risen so high that the margins are incredibly narrow. The BRRRR Method allows for investors to seek properties outside of the traditional MLS systems, opting instead for the aforementioned privately marketed property sources we alluded to above.
What are the benefits of working with privately marketed properties?
- Smaller Crowds – When you have fewer eyes on a property, you will find that your chances of acquiring it have improved dramatically. Privately listed properties are much less likely to be overwhelmed by public browsers, leaving more room for you to acquire that dream investment property.
- Networking – When you travel off the beaten path, you’ll find yourself enjoying new scenery as well as new connections. Networking through privately marketed properties can be something that benefits you today, tomorrow, and for years to come.
- Sharpened Skills – When you are forced to adapt to new situations, you hone skills that you might not have otherwise utilized. Working the different markets while focusing on your financial strategies will help you learn the tools and techniques as well as the tips and tricks you’ll need to succeed years down the line.
There are many benefits to searching the off-market properties for sale and as a BRRRR Method practitioner, these properties can become immensely profitable with the right application.
Accept Current Market Conditions (and get creative)
The other option that BRRRR investors can take advantage of is simple: embrace the market conditions as they are. BRRR Method practitioners can opt to face high prices while reducing their margins, still focusing on the potential for cash flow and passive income in the future. Rental rates rising alongside home prices have made it easier than ever to buoy potential payments through rental deposits.
Even when acquiring properties at the market rate, you can do your diligence to build a quality portfolio. Property values may rise in the future, which can allow current BRRR practitioners to be capable of investing in their future while building wealth at the same time.
Get out the Elbow Grease
While life can be made easier with the right investing techniques, you are going to want to still practice what you preach to find success with the BRRRR Method. The BRRRR Method was all the rage when the housing market was great and now that the market has begun to turn, investors must also adjust how they approach their work.
While there is never a bad time to invest, it is important to take advantage of emerging opportunities while retaining a clear focus on your long-term strategies. Rising rates and inflated prices may have kept some investors out of the industry, but that doesn’t mean that everyone is going to be sitting on the sidelines.
Learn More From Hard Money Lenders AZ
Hard Money Lenders AZ is based out of Phoenix, AZ. With decades of industry experience spread across a full team of industry professionals, Hard Money Lenders AZ is uniquely qualified to help burgeoning and professional investors find the funding they need to acquire the properties that they desire.
When you work with Hard Money Lenders AZ, you benefit in a number of ways.
- Easy Funding – Hard Money Lenders AZ was founded on the idea that bad credit should not disqualify you from acquiring the loan that you need to succeed. The potential for hard money lending in the state of Arizona revolves around credit history, property collateral, and insurability.
- Fast Funding – Turnaround times from submission to funding acquisitions are among the fastest in the industry. Some business loans can get processed within 24 hours, depending on the individual, the loan, and their intrinsic details.
- Reliable Results – With a roadmap of history dating back for years, Hard Money Lenders AZ has a track record that speaks for itself. Focusing on making clients pleased with their services, Hard Money Lenders AZ has a client history and business reputation that stands above.
To learn more about hard money loans and the BRRRR Method, reach out to Hard Money Lenders AZ!