If you want to fast-track your way to real estate wealth, there are few better ways than the “BRRRR” method. The acronym stands for “buy, rehab, rent, refinance, and repeat.” It’s a five-step investing strategy that lets you leverage sweat equity and cash-out refinancing to build your rental portfolio faster than you could through a traditional buy-and-hold approach.
But before you can get to the first step—“buy”— you must find a suitable property. After all, not every property is cut out for a BRRRR. At ABL, we’ve financed countless BRRRR properties with our Fix & Flip and cash-out refinance loans. Yours could be next!
What Are BRRRR Properties?
BRRRR properties are homes well-suited for the BRRRR investing strategy. This means they:
- Have value-add potential. In other words, you can buy the property at below-market value, renovate, and then have it reappraised at a higher value.
- Can be turned into a rental. After all, zoning laws in some areas may prohibit or severely limit rentals. Be sure to check local regulations.
- Can be (re)financed. Even if you buy the property with cash, you’ll need to refinance it later (through a hard money lender like ABL) to extract cash equity to buy another BRRRR property (the final step).
If a property meets this minimum criteria, it has BRRRR potential. But how do you find such properties? The key is to find off-market opportunities where you can buy at a discount. While you may find BRRRR opportunities on online marketplaces like Zillow, the competition there from other buyers makes it hard to buy at a steep enough discount that the deal will pencil out.
How to Find BRRR Properties
Now let’s dive into our five favorite alternative strategies to find the best BRRRR properties:
1. Drive for Dollars
Driving for dollars is an age-old practice of driving around neighborhoods to find hidden real estate gems at minimal cost. Here’s how it works:
- Choose a neighborhood. Since you’re looking for a BRRRR property, ensure it’s an area where rentals are allowed.
- Drive around looking for opportunities. The goal is to spot distressed homes with potential. Telltales that a house needs work include boarded-up windows, an overgrown yard, and peeling paint.
- Write down addresses. Take note of any houses with potential.
- Contact owners. Use skip tracing software or public records to identify the homeowners. Then contact them to see if they’d be interested in selling. If you can’t find their contact information, knock on the door or leave a postcard in their mailbox.
2. Post Bandit Signs
Have you ever seen those signs placed along intersections that say “We buy houses”? Those are bandit signs. They’re designed to catch the attention of drivers who may consider selling their house for cash—which is another cost-effective way to generate BRRRR property leads.
Before you post any signs, however, choose an area with a good rental market and distressed homes. Then check local regulations on placing signs. From there, create signs with a short, clear message and your contact information to place strategically throughout the neighborhood.
3. Attend Auctions
Properties that fall into foreclosure or tax delinquency typically end up for sale at auction. This is how most mortgage lenders and county governments cut their losses. They sell the repossessed property to the highest bidder.
As a BRRRR investor, this is an opportunity to find distressed homes at a discount (owners who fall behind on their mortgage or taxes likely don’t keep up with home maintenance, after all). Ask your county office when it will hold its next auction, or search online for foreclosure auctions near you. Some auctions are held in person, while others are held online.
4. Go to Estate Sales
An estate sale is a large sale of someone’s personal property, typically after their death (though it can also result from a divorce or bankruptcy).
This can be another great way to find homes with BRRRR potential. If the house isn’t already listed for sale, ask the surviving family members or estate executor what their plans are for it. There’s a good chance they may want to liquidate the house to split the sale proceeds among heirs as soon as possible. By offering to buy it off them quickly, you could secure a great deal.
5. Network
Finally, build a network of local real estate professionals who can refer you to BRRRR deals you wouldn’t find otherwise. Here are some valuable people to have in your corner:
- Wholesalers: Wholesalers put properties under contract and then assign them to investors for a fee. Essentially, they do the hard work of finding deals for you so you can focus on other parts of your business.
- Attorneys: Lawyers who specialize in foreclosure, bankruptcy, or divorce work with clients who are often highly motivated to sell their houses.
- Contractors: Local contractors may know about renovation projects left unfinished by owners due to financial strain or other setbacks. By stepping in to finish the job, you could secure a lucrative BRRRR investment.
- Real estate agents: A good real estate agent is well-connected. They can alert you to properties for sale before they officially go on the market (aka pocket listings).
- Other investors: Some real estate investors are forced to pass on deal opportunities due to limited capital, time, or other constraints. However, they may be willing to pass such deals on to you if you build a strong relationship with them.
- Mortgage lenders: Ask lenders if they have any properties they’re trying to get rid of (aka real estate-owned or REO properties). They may be willing to sell to you at a discount to get properties off their books.
Partner with ABL
Once you’ve found a BRRRR property, it’s time to buy it. We can help you close on a property in as few as three days. Your local ABL team will then support you during the renovation and leasing phases. When you’re ready to refinance, we can help ensure you get the best cash-out deal so you can repeat the BRRRR process from step 1. Pre-qualify for a loan today!