The BRRRR Method and Hard Money Lending

If you're interested in real estate investing or you've been doing it for a while, you may be familiar with the BRRRR method. This method involves several steps that can give you a rather lucrative return on your investment if you do things right. When it comes to using the BRRRR method and hard money lending, how can you stay on top of your game? Read on to learn more about this real estate investment method and how it can help you get more from your hard money loan. The Basics of the BRRRR Method In recent years, the BRRRR method has become the talk of the real estate investment world thanks to Brandon Turner, of Bigger Pockets, who coined the term. This practice isn't actually new, but the acronym makes it much easier for investors to remember and put the entire process into practice. Let's break down what these letters mean, and then dive in deeper to discover how each step in the process can help you get more money from your investments. First, the letters in the method stand for Buy, Rehab, Rent, Refinance, and Repeat. The main idea is to leave some money in your investment property while you generate a new source of cash flow for future investments simultaneously. You can think of the BRRRR method as a smart strategy to create a passive income using real estate. While this method can be rather effective, there are always some risks involved that you should keep in mind, too. Let's take a closer look at the basics as well as how using a hard money lender to buy and rehab your investment properties can help you get more deals done at a much faster pace. Using hard money lenders can also help you maintain your cash position and improve cash flow. Buying In order to make the BRRRR method work for you, the value of the property that you buy is crucial to your success. To determine the best value possible, the ARV or "after repair value" of your investment property should be higher than or equal to 30 percent of the purchase price and the cost of renovation together. To get a good profit, you should never aim for margins lower than 30 percent since there won't be much room left in your budget for any unexpected costs like possible repairs and other emergencies. You also want to maintain a decent margin in case the property you buy appraises lower than you anticipated. This margin rule is known as the 70% Rule among experienced real estate investors. If you buy investment property according to this rule, the purchase price and rehab costs combined should be equal to or below 70 percent of the total amount of the after repair value, or ARV. One other reason investors using the BRRRR method abide by the 70% Rule is that most conventional lenders won't loan more than 75 percent of the property's total value. However, a hard money lender will often loan up to 80 [...]