What is the BRRRR Method?
The BRRRR Method stands for “Buy Rehab Rent Refinance Repeat.” It is a real estate investing strategy that involves purchasing properties and creating value through renovations, but instead of “flipping” once the rehab is completed, the investor rents the property out, refinances the financing into a long-term, fixed-rate loan and then repeats the process to build a real estate portfolio!
What is a BRRRR Loan?
A BRRRR Loan refers to a mortgage loan financing a real estate investor following the BRRRR Method. A BRRRR Loan could be a hard money loan used to finance the buying and renovations of a property or it could refer to a refinance loan used when the property is fully rehabbed and rented.
Do you have to pay cash to BRRRR?
No. BRRRR strategy investors can choose to purchase and renovate properties under the BRRRR method with all cash or choose to use a hard money loan for the majority of the costs. Many BRRRR method investors choose to use hard money financing to be able to afford higher-value properties and generate larger returns. BRRRR Method investors that choose a hard money lender such as Easy Street Capital that doesn’t require appraisals for its EasyFix hard money loans are able to compete with cash offers.
Is BRRRR better than flipping?
It depends on many factors, including each individual investors’ financial situation, goals, skill set and the market environment. Many of the best real estate investors have diversified strategies are open to flipping versus doing BRRRR as the realities of the individual property and market dictate. Easy Street Capital is rare among DSCR Lenders in that we don’t penalize or restrict refinances on flips that are put on the market and the investor changes their mind and wants to keep and refinance!
What states does Easy Street Capital offer BRRRR Loans in?
We offer EasyFix Hard Money Loans for the first two steps of BRRRR Method in every state except Minnesota, North Dakota, Nevada, New York and South Dakota. We offer EasyRent DSCR refinance Loans in every state except North Dakota, Nevada and South Dakota.
How Much Money do you need for the BRRRR Method?
Generally it is recommended to have between $75,000 and $100,000 budgeted for investing in the BRRRR Method. However, if financing the purchase and renovations with a hard money loan from Easy Street Capital, you can get started with less cash, as we will finance up to 90% LTC (Loan-To-Cost) of the purchase and rehab. This means a borrower financing the BRRRR Method with Easy Street Capital will need a minimum 10% down payment.
What is the minimum loan amount for Easy Street Capital’s BRRRR Loans?
The minimum loan amount for BRRRR Loans from Easy Street Capital is $75,000. This is for both our EasyFix Hard Money Loan program and EasyRent DSCR Refinance Loan program.
What are the advantages to using Hard Money instead of Cash for the BRRRR Method?
The main advantages of using hard money BRRRR Loans include getting started faster, increasing your portfolio faster and getting higher leverage (LTV) on the refinance.
Many sellers only consider cash offers for the best properties for the BRRRR Method, how can I compete if I use a hard money loan for the BRRRR Method?
Cash offers are often preferred by sellers because the sale can close much quicker and with less risk of falling through versus buyers relying on financing. The most common reason that a deal will fall through is that most hard money lenders require an appraisal, and that can take a couple weeks and comes with the risk the valuation comes in low, killing the deal. Easy Street Capital is the best BRRRR Loan lender because our hard money loans do not require and appraisal, thus making buyers financing with Easy Street Capital fully competitive with cash buyers!
What does ARV mean with regards to the BRRRR Method?
ARV is a real estate term referring to “After-Repair Value.” It refers to the estimated value of the property once the planned rehab is completed.
What is the maximum loan amount for hard money loans used by BRRRR strategy investors offered by Easy Street Capital?
Easy Street Capital currently offers maximum loan amounts of 90% of Cost (purchase price + rehab costs) and 70% of the estimated ARV (LTV).
How quickly can Easy Street Capital close a hard money loan?
Easy Street Capital’s EasyFix hard money loans can close and fund in as little as 48 hours!
What is Seasoning in the context of the BRRRR Method?
Seasoning in real estate investing refers to the amount of time, measured in months, between the purchase date of the property and the date you refinance the property with a new mortgage loan.
What is Cost Basis in the context of the BRRRR Method?
Cost Basis refers to how much money has been spent by the investor in the first two steps of the BRRRR Method – the purchase price and the cost of renovations.
What is a Cash-Out Refinance in the context of the BRRRR Method?
A cash-out refinance in real estate finance is a refinance mortgage loan (either on a property owned free and clear with no debt or in conjunction with paying off the old mortgage) in which the borrower receives greater than $2,000 in proceeds. Proceeds are generally determined by subtracting the payoff loan amount, closing costs and any escrows from the new loan amount.
What is a Rate-Term Refinance in the context of the BRRRR Method?
A rate-term refinance in real estate finance is a refinance mortgage loan in which the borrower receives less than $2,000 in proceeds at closing or has to bring additional funds to cover payoffs, closing costs and escrows.
What is the minimum seasoning requirement for a Cash-Out Refinance BRRRR Loan?
Easy Street Capital offers cash-out refinance DSCR Loans for investors utilizing the BRRRR Method in as little as three months! This is significantly faster than conventional lenders, which have a full year (four times as long!) seasoning requirement. In addition, many other DSCR Lenders that offer BRRRR refinance loans, have a six-month seasoning requirement for cash-out refinances.
What is the minimum seasoning requirement for a Rate-Term Refinance BRRRR Loan?
Easy Street Capital has no seasoning requirements for BRRRR Loan rate-term refinances!
What is the maximum LTV (Loan-To-Value) of a Refinance BRRRR Method Loan from Easy Street Capital?
Easy Street Capital understands that maximizing leverage on the refinance is extremely important to BRRRR Method investors. In order to help our borrower partners succeed, we offer up to 75% LTVs on Cash-Out Refinances and 80% on Rate-Term Refinances, higher than almost all other DSCR Lenders!
What value is used for the Cash-Out Refinance for Easy Street Capital’s DSCR BRRRR Loans?
While most DSCR Lenders will utilize the lower of the cost basis (purchase price + renovation costs) and third-party appraised value to calculate maximum LTV, Easy Street Capital will use the third-party appraised value (even if significantly higher!) as long as the qualifying credit score is above 700!
What is a DSCR Loan in the context of the BRRRR Method?
DSCR Loans are mortgage loans secured by residential real estate turnkey properties strictly used for a business purpose and underwritten primarily based on the property. They are popular with BRRRR method investors due to flexible underwriting requirements and easier qualification versus bank or conventional financing.
How does the BRRRR strategy work with regards to getting a “free” rental property?
Many real investors love the BRRRR method because if executed properly, at the end of the process, you get all of the money you invested in buying and rehabbing the property back and you also have a cash-flowing rental property in your portfolio! This works because you can do a cash-out refinance in which the new loan amount is equal to your cost basis (purchase plus renovations costs) and you also own a rental property. This is because the After-Repair Value of the property is often greater than the costs of purchasing and renovating the property, a concept often referred to as “forced appreciation.”
How does the BRRRR method work if I want to invest with partners in an LLC?
Many BRRRR investors execute the BRRRR method with partners, as complementary skill sets are often beneficial to success in real estate. If you are looking to invest with partners or in an LLC, the main difference is that for financing, particularly the refinance, will need to be done with a DSCR Lender (which allows investors to borrow in an LLC or partnership) instead of with conventional loans (which only allow for individual borrowers).
What is AirBnBRRRR?
AirBnBRRRR refers to a twist on the BRRRR method in which the property is rented as a short term rental rather than on a long-term lease in the “rent” portion of BRRRR. Short Term Rental investing is becoming more and more popular among real estate investors, and many investors are leasing their properties as a STR, including when using the BRRRRR strategy.
Can I get a BRRRR Loan if I am renting the property as a Short Term Rental?
Many lenders, including DSCR Lenders, do not allow refinances under the BRRRR method if the property is utilized as a STR, requiring a long-term lease or the property to operate for at least 12 months prior to refinancing. Easy Street Capital, however, is the Best DSCR Lender for investors utilizing the “AirBnBRRRR” strategy because we do not require long-term leases in the “rent” portion of the BRRRRR Method. Easy Street Capital will allow for refinances at full leverage and no restrictions if utilized as a short term rental, only requiring documentation that the property is listed on a booking platform and documented proof of one completed booking.
What is the 70% Rule for BRRRR?
The 70 Rule for BRRRR represents the general rule of thumb that when evaluating a property to purchase using the BRRRR strategy, you should be only doing deals in which the costs are projected to be 70% or less than the ARV (After-Repair-Value).
What is the 1% Rule for the BRRRR Method?
The 1% Rule for the BRRRR method the general rule of thumb that when evaluating a property to purchase using the BRRRR strategy, you should only do deals in which the monthly rent once renovations are completed is 1% or greater than the purchase price plus renovation costs for the property (your cost basis).
