Know if the BRRRR method is right for your commercial real estate investment
# Is the BRRRR method right for you?

Despite being tried-and-tested, the BRRRR investment strategy is not for everyone. This way of doing real estate investing could be overwhelming, especially if you are just beginning to explore the opportunities in the space.

This strategy is also not for people who would like to flip properties and achieve profit through sales. In the fixer-upper strategy, the investor renovates the property in the hopes of upping its sales price. On the other hand, the investor who uses the BRRRR method flips the property not to sell it but to use it as leverage to grow an investment portfolio.

While this strategy might not be the easiest to put into action, it remains an effective way for those who would like to grow their portfolios quickly.

## What are the advantages of the BRRRR strategy?

The biggest upside of this strategy is that it allows investors to pay less for properties. As you repeat the process, you will get to a point where you will not have to take out even a cent from your pocket. Profits from your initial investment will already be enough to fund your next venture.

With less out-of-pocket money involved, the assets you acquire through this method will have higher returns.

The BRRRR strategy also allows you to accumulate significant equity during the rehab part of the process. You can easily predict how much ARV the property will have if you do your homework. Imagine buying an undervalued property at US$150,000, spend US$20,000 in repairs and renovations, and end up with a dwelling that is worth $200,000.

The passive income from rents is also a huge benefit of this way of investing. Since you are retaining ownership of the rental property even after using its equity to refinance, you will be able to receive a steady stream of income. You might not necessarily feel this if you are only beginning to invest, but a portfolio composed of at least 10 multi-family units will already provide a substantial amount of passive income.

## Are there any downsides to the BRRRR strategy?

Employing this strategy takes patience and a lot of work. Renovating the property alone can already require you to exert more time and effort. Add to that the stress you might encounter looking for a lender that can offer you cash-out refinance.

If there is one significant hurdle you will have to face, it is the costs of your initial investment. You might need to save a lot in order to kickstart your investment journey. If you funded your investment using a hard money loan, you might also find yourself paying for high financing costs in the short term.

Another potential drawback is the possibility of the property not being able to build up some capital gain. If this happens, refinancing and recouping your initial investment might not be feasible. You can lessen the possibility of this happening by making sure that you do the math early in the process.
[{"id": "gx1odb8", "text": "I think you are in the wrong place.", "replies": [], "depth": 1}, {"id": "gyhtrqm", "text": "I think this was intended for the resi RE subreddit. The guys on here are a lot more sophisticated than them.", "replies": [], "depth": 1}]