In Chicago, as we hit December, BRRRR sounds like the sound we make when we step outside! But, it is actually a very useful real estate investing technique! Let’s break down what each letter stands for, so you can see if this is a game plan that would work for you and your portfolio.
B: Stands for buy. When looking for an investment for the BRRRR strategy, we want something that needs a little TLC. This allows us to buy it for well under market and use some elbow grease to end up with a great investment.
R: The first R is for repair. We are going to take the property we just bought and force some equity into it. We do this by taking it from livable to somewhere you would actually want to live. Make sure you are using rent quality materials - not spending too much on high-end finishes - and making sure the materials are durable. Make sure you are working with a good property manager or Realtor so that you can avoid any pitfalls, as well as include all of the latest trends.
R: The second R stands for raise the rents. You may be getting $500 a door when you buy the property. But after installing new floors and upgrading the countertops, it’s time to get top dollar! Get with your property manager or Realtor and see what the apartments can rent out for now.
R: The third R is for refinance. With a nicer place and higher rents, we now have some equity in the building. This means we can refi and take cash out to use as the down payment for our next project, which brings us to the last R...
R: Repeat! Use the money you got out to buy a new property and follow the BRRRR steps again and again until you have built your empire to the place you want it to be.
Don’t fall into any major pitfalls! Make sure you are working with an investor-friendly realtor when buying your property. And, stay in communication with your property manager during renovations to make sure you aren’t painting the kitchen a color no one will want to rent.
Need a property manager in Chicago? Kale Property Management is ready to help you build your portfolio to a point where it is a hands-off retirement plan - letting you live all of your dreams while collecting passive income.