The topic and strategy we are going to discuss today is How to get rental properties for free using the BRRRR method.
BRRRR stands for:
Essentially, you are looking to buy a house for less than it’s worth with cash (can be yours or someone else’s (for example, investors and hard money lenders) and then refinance it at a higher value so that you get all of your cash back and now you have the property for free!
The best way to understand this is by looking at an example:
With this strategy, you are basically creating the down payment by forcing the equity appreciation. Using the BRRRR method, you don’t have to save the $25,000 down payment that would be necessary to buy this home if you just bought it normally for $125,000.
Altogether, this strategy makes sense if it is more time and cost-effective for your personal situation to do the work to force the equity appreciation as compared to saving the $25,000 that would normally be required to buy a rental property worth $125K at 20% down.
The BRRRR method allows you to build a very large portfolio in a short amount of time if you want.
We have used this method on a couple of rental homes ourselves and it worked just as planned. Our appraised values were actually much higher and we were able to pull out extra money to keep as a cash reserve or even invest in other ventures.
Although there are many beautiful elements to this investment strategy, we have not done any more and are even in the process of selling one of these properties. In future episodes we will share more details and stories about our experiences with single family rentals.
If you want to know a bit more about our thoughts on this topic now, though, just go listen to Episode 2 on why we love investing in REITs more than Rental Properties.
If that sparks your interest in REITs, then you should definitely consider signing up for our monthly investment update report because, in that report, we give access to all of our REIT holdings and even give a list of the best REITs in our opinion to buy that month as well as our own purchases and sales for the month.
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