Building Wealth with a BRRRR
Real estate investing can be a great way to build long-term wealth and generate passive income. However, for many investors, the upfront costs of purchasing and renovating a property can be a significant barrier to entry. That’s where the BRRRR investing strategy comes in. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat, and it’s a popular strategy for real estate investors looking to generate cash flow while building a portfolio of rental properties.
In Denver, Colorado, the BRRRR strategy can be particularly effective for investors who are willing to put in some sweat equity. Denver’s real estate market is hot, with rising prices and high demand for rental properties. By purchasing distressed properties in up-and-coming neighborhoods, investors can often get a good deal and increase the value of the property through renovations. Once the property is fixed up, investors can rent it out to generate passive income and then refinance the property to pull out equity, which can be used to fund additional investments
A BRRRR Case Study
House was purchased as a 3 bed / 1 bath 1,900 sq. ft single family house. After a full gut remodel, the investor converted it to an unofficial duplex with 5 beds / 3 baths / 2 kitchens / and 2 laundries.
They lived in the house during the renovation and then turned it into a house hack, rent-by-the-room for his first year.
Total Expenses
| Purchase Price | $320,000 |
| Down Payment (3%) | $11,300 (Closing Costs = ~$1.7k) |
| Expenses | |
| PITI (no PMI) | $1,675 (Dropped $150 PMI) |
| Utilities | $550 |
| Vacancy, CapX, Repairs 6% | $250 |
| Self-Management | $0 |
| Total Expenses | $2,475 |
Rent & Income
| Rent | $4,175 |
| Net Rental Income (Monthly) | $1,700 |
| Net Rental Income (Annual) | $20,400 |
After their first year of owning the property and completing the rehab they refinanced the property with a realized equity of $161,000.
| Purchase Price | $320,000 |
| Rehab | $92,000 |
| ARV (2021) | $463,000 |
| Equity | $161,000 |
| HELOC | $91,400 |
With a HELOC of $91,400 they were able to purchase investment property #2, move out of the first house and rent all 5 bedrooms by the room.
Our thoughts:
Here’s what I love most about this story. This was in 2020 when there was mixed sentiment about real estate, the economy and public health and this buyer saw an opportunity and seized it. Now he’s realized the return on that investment and purchased two more properties over the past three years and is projected to reach FI by 2025.
So, is it possible to do this in the current market? YES! I recently met another investor who is BRRRRing a property here in Colorado, AND he’s not even doing the renovation himself. He has a contractor doing the work and he’s still going to realize a gain in year one.
Want to check out some BRRRR properties in Colorado? Reach out!