BiggerPockets, BRRRR, and Real Estate
Real estate investing is risky business, but if you know the market and some key tricks-of-the-trade, the reward can be your own financial freedom.
BiggerPockets is the complete resource for anyone looking to succeed in real estate investing. The online community was started by investors to support the growth and learning of other investors.
This real estate community is helpful for landing your first investment property, expanding your current portfolio, networking with fellow investors and vendors, or simply bettering your financial situation. BiggerPockets features regularly updated resources, ranging from free content to deal-evaluating calculators.
Content is available in the form of blog articles, numerous podcasts, video, and webinars. Make sure to check out our BiggerPockets podcast episode with James Dainard, where he discusses his own personal experiences flipping, wholesaling, and BRRRRing.
The site provides forums for investors to discuss real estate news and current events, in addition to other trending topics. Those in need of a network can search from a host of recommended vendors, including real estate agents, mortgage lenders, hard money lenders, contractors, and investment companies.
Bigger Pockets also offers a paid suite of tools and perks for members, as well as a bookstore with published materials on investment techniques and real estate strategies for beginners and experts alike. Other educational resources include glossaries, guides, COVID-19 content, and much more.
Investors can choose from a variety of deal-evaluating calculators online, including specialized estimators for rental properties, fix and flips, BRRRR, wholesaling, mortgage payments, rehab, the 70% rule, and Airbnb.
The BiggerPockets rental property calculator helps investors determine if a specific property is a smart investment. When considering a rental property, you will want to make sure the property will generate cash flow based on the financial analysis that is conducted prior to purchase.
If you want to invest in real estate but are unsure which property you can afford, the mortgage payment calculator is the best way to determine your threshold. Just enter the home value, down payment on the property, type of mortgage (FHA, conventional, etc.), and the interest rate on the mortgage.
The house flipping calculator is used to decide if a fix and flip deal would be a solid addition to your portfolio. Simply begin a new report and follow the steps of inputting the property, purchase, rehab, and sale information.
Check out the BRRRR calculator to keep your math accurate and conservative to maximize your return investment and increase your chance for success. This calculator was created to simplify the process of analyzing and visualizing the returns on potential fixer-upper properties.
The 70% calculator follows the “70% Rule of Thumb,” which states that a rehabber should pay no more than 70% of the after-repair value, minus any repair costs. Use this calculator to establish an estimated purchase price and avoid paying too much for a property.
Lastly, one of the most important numbers to get right when analyzing a deal is the cost to rehab the property. BiggerPockets makes this process easier with the new rehab calculator, which estimates costs based on labor and materials, cost-per-unit, or a flat fee.
BiggerPockets is a big proponent of BRRRR investing. This method of real estate investing focuses on finding a distressed property to buy, rehab, rent, refinance, then repeat. This strategy is known as the smart investor’s investment cycle.
Through the BRRRR method, investors buy homes quickly, add value through rehab, build cash flow by renting, refinance into a better financial position—and then do the whole thing over again. Over the years, BRRRR investing allows you to grow a portfolio without having to tie up large sums of cash for a long period of time.
The first step in BRRRR is purchasing an undervalued or distressed property with alternative financing, such as cash, private loans, or hard money. According to BiggerPockets, the key to success is buying properties under market value and never investing more than 75% of the property’s after-value repair.
If you choose to borrow money from a hard money lender, you will be paying high fees and interest rates. The longer your hard money loan is in place, the less money you will make. Getting in and out of the deal as quickly as possible is a key component to the success of this investment method.
Next, make improvements to the property in a way that makes it livable and increases the value. There are two key questions to keep in mind when rehabbing a rental: What do you need to do to make this house livable and functional? Which rehab decisions can you make that will add more value than the original cost?
Examples of rehabs that add value include fixing the kitchen with reasonably priced additions, switching out carpet for hardwood floors, updating the bathrooms, or new paint.
Rent the property out to market standards. The less time you are without a tenet, the better. Never let a rental property sit empty because it will have a negative cash flow.
In order to refinance a rental property, banks will want to see that it is producing income. After rehab, it’s critical to fill the property with good tenants that will pay each month. Make sure to screen diligently and be strict about it. A vacant property is still better than one with tenants who forget to pay rent or cause lots of damage.
When refinancing, you will need to get a new appraisal. There are two key factors the appraiser will take into account: comparable numbers and material improvements, such as any renovations, upgrades or repairs.
If you used a hard money loan initially, this is the time to refinance into a loan that offers longer-term and lower interest rates. Saving money is not always the goal when you are refinancing a rental property. The goal is to get cash out of the house, while still owning and maintaining the rental property.
Finally, use the profit left over from the cash-out refinance as a new down payment for your next investment property. At this point in the cycle, BiggerPockets encourages investors to take everything learned, gained, and improved upon—and put it back into action.
If done properly, the BRRRR method has the potential to increase your net worth, create passive income through rent, and ultimately create financial independence.