BRRRR Method Canada
BRRRR or Buy, Rehab, Rent, Refinance, and Repeat is a well-liked strategy for Canadian real estate investors to effectively develop or grow real estate portfolios. The technique entails buying a property (Buy), making improvements so you can rent it out (Rehab and Rent), refinancing to convert your equity into cash, and then using the money to start the process over again (Repeat).
Examining the numbers and over all risk:
In order for a BRRRR project to be successful, the math must be correct. If they don’t, you can wind up with a loss or not have enough money to pay your expenses on time. This may be disastrous. The figures reflect the cost of purchasing the property as well as the price of repairs, utilities, taxes, and other expenses. You also need to calculate the rent prices and possible post-renovation worth of your home. The amount of money you can extract from the property via a refinancing ultimately depends on how much the refurbished home is worth.
BUY
Buy is represented by the first letter of “BRRRR.” Finding a good property is essential and key for the success of your project, so don’t rush this step and take your time and ask questions in this stage.
Always do extensive research before purchasing a listings to ensure you locate a suitable investment opportunity – for both future value and rental revenue.
You should also be sure to account for the associated charges. This would include reasonable costs for the upgrades, as well as anticipated rental costs and profit margins.
Doing your research will help you completely comprehend the cost of modifications and the prospective resale value. Before entering into a contract, you must be certain that your budget is appropriate and you will be making money.
I can help connect you with trustworthy, qualified contractors to make sure everything is taken care of if needed!
RENOVATE
The first “R” in this strategy stands for renovate. This is the process of completing all the necessary renovations to a property after you’ve purchased it and getting it ready for renters.
Always think about the value an improvement will bring to the home and if it will increase its rental value before making any changes, since overly ambitious improvements may end up costing more than they’re worth.
Many folks commit this error! In this area, it’s simple to overextend. Every little thing adds up. But keep in mind that because it is a rental, the expenses must be worth the rent.
Always plan ahead for expenses and make sure your financial expectations are reasonable. After that, start by locating trustworthy, top-notch contractors if necessary.
RENT
The second phase of the plan is to rent out the house when the renovation process is finished. Finding a property management firm or a realtor may be useful
Alternatively, if you want to manage every aspect of the process yourself, this would include identifying and vetting suitable renters, creating a leasing agreement, and administering the property.
It’s crucial to remember that being a landlord comes with a lot of responsibilities. But you shouldn’t be discouraged by this. Just take a moment to think about all the facets of this stage before beginning.
REFINANCE
You can consider refinancing options after successfully renting out and upgrading the house. At this point, it’s important to plan carefully and think about all your options.
Because every lender is unique, it’s crucial to conduct your homework. It’s crucial to keep in mind that not all banks permit refinances within the first year, so make sure you contact us to see your options ahead of time!
Examine what the various banks have to offer and how much you may borrow based on the property’s new valuation; certain lenders might not permit extra borrowing on rental properties within the first 6 months to 1 year after a purchase of the property.
You may begin to develop a plan for your next home after you are aware of your possibilities and what your overall budget would be based on the refinance amount received.
REPEAT
Finally, you might carry out this procedure once again by refinancing your second home in order to fund the next one, and so on. You will learn more about this as you go along since it is a learning curve..
Ensure that you thoroughly prepare every step of your process, and keep preparing as you purchase your new properties.
The nicest part of this step is that you are essentially recycling the same money. Last year, I helped my clients using this method to purchase millions of dollars’ worth of real estate.
BRRRR PROS AND CONS
Some of the pros of this strategy are:
- Very high potential return on investment
- Can rent out and generate more money
- Equity may be built throughout the remodeling phase
- Quality renters are drawn to recently renovated properties
There are, however, certain risks, including:
- Short-term loans may cost more
- The remodeling might take a long time and might end up being expensive
- Prior to renting out a home, there is a waiting time until you find your ideal tenant
- It might be challenging to anticipate the property’s future value at the start of the project
