What properties make you money as a real estate investor? Here’s how BRRRR properties create wealth instantly.
There’s no contest: BRRRRs create wealth WAY faster than retail properties.
In fact, the right BRRRR property can create a net worth increase of 25% of the value of the property nearly instantaneously.
To show this in action, let’s break down the examples of two houses with the same numbers – but one is a BRRRR property and one is retail.
Retail vs BRRRR: The Numbers
- Value: We’re comparing two homes with the same value – same neighborhood, same block, same size. Let’s say the value is $400k.
- Loan: For the BRRRR, our total costs would add up to $300k ($250k purchase price + $50k closing, rehab, etc). Our leverage 100% covers this amount. For the retail home, we could get an 80% LTV, so our remaining loan is $320k. On retail, we have less cash flow because we owe more money.
- Cash Transfer: With BRRRR, you’re moving $0 of your own money. This is why properties with the BRRRR strategy are so popular for investors. With the retail property in our example, you need to transfer $80k of your money as a down payment.
There are two problems with the cash transfer requirement in retail properties. 1) You need the cash to get into it. And, 2) The last “R” in BRRRR is repeat, so you’d have to have $80k again for your next property and your next. On under-market BRRRR properties, the zero out-of-pocket costs free you up to repeat the process over and over.
- Payments: BRRRR payments will be lower than retail payments by about $25-$50/month, simply because the loan amount is lower.
- WEALTH: The BRRRR strategy property immediately creates $100k. The retail property adds $0. It only has the loan + the $80k that was yours to begin with.
How BRRRR Properties Create Wealth
The wealth in BRRRR comes from the difference between the value of the property and what you owe on it. This usually ends up being 25% of the value of the home.
If you multiply this process by 5-10 properties? You’ve suddenly got half a million to a million dollars in net worth.
Have BRRRR properties create wealth like this isn’t just wishful thinking. In 2010, we helped multiple families buy 10 properties in one year using this method. Many of their properties tripled and quadrupled in value over the last 10+ years.
The 2023 market is shaping up to look a lot like 2010. The time to buy is coming soon.
Read the full article here.
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