The BRRRR Investment Strategy

This is an investment strategy that has been gaining a lot of traction in Burling and in the Halton Region in recent years and we are here to break it down for you. This is the perfect mix of house flipping and rental property investing. Why has it become so popular? It is simple – this strategy has the potential to increase net worth and deliver substantial monthly cash flow very quickly.

BRRRR stands for:

Buy, Rehab, Rent, Refinance, Repeat

Buy: You find a dilapidated house that needs substantial renovations and purchase it under market value. You are targeting real fixer-uppers in “decent” neighbourhoods. These purchases are usually funded using short-term funds meaning private money and private investors and not your large charter banks.

Rehab: Fix it up! It is prudent to set a budget and stay within it as capital costs in renovation projects are notorious for ballooning over budget. It is time to get your hands dirty – you want high-end finishes as this will help attract that A-Class tenant at the end of the project. Great houses attract great tenants!

Rent: Find the perfect tenant to rent out the house. Do your homework – hire a Realtor to help – it is important to have a trustworthy individual on the lease who pays every month on time. The cash flow of this project will rely on the quality of tenant you can secure.

Refinance: Refinancing the property at a much higher valuation compared to its purchase price will allow you to free up a lot of capital. FYI – A bank will typically want 6 months to 1 year of ownership before refinancing a home and max out around 80% loan to value. Every situation is unique, and it is important to understand the numbers while putting together your projections. Do your homework! After the refinance has been secured you use this money to pay off the short-term lender. Have your debt in a long-term mortgage with much lower interest rates, and leftover capital can be used to move into the next project.

Repeat: Do it all again!

As with any investment strategy, there are risks associated with it. If you would like to learn more on how to minimize these risks then reach out to Karen Paul & Associates and we would be happy to dive deeper into this strategy and see if it a good fit for your portfolio

Written by:

Colin Gainham of Karen Paul & Associates Inc.