Let’s talk about your actual money making strategy. It is one thing to find an awesome deal and do all the fixings to get it valued at top dollar but, without an exit strategy in place that means nothing… nothing at all. An exit strategy is commonly known as your money making plan (well at least that is what I say). Knowing this plan or strategy before acquisition or by the least before rehab is halfway done is so IMPORTANT. There are many different exit strategies you can take and I want to talk about my favorite The “BRRRR” method. Using this method I was able to grow my rental portfolio in no time, it is truly remarkable.
This method is commonly used by investors to roll money from one investment to another. This method is called “BRRRR” so, easy to remember right! It is just so much fun to say… “my exit strategy is BRRRR”, how great! “BRRRR” stands for Buy, Rehab, Rent, Refinance and Repeat. The key to this process is to find great flip properties that have high rent rates this will help expand your portfolio expenditionally. This method is a perfect match with HELCO loans (Home Equity Lines Of Credit) because investors leveraging this type of method can deduct, deduct, deduct the loan’s interest rate on their taxes.
The key to making this all work, is to have equity in the house your are flipping and wanting to refinance with either the HELCO loan or an Equity Loan. These loans are not easy to obtain and will have to be verified by an appraisal. The moment you start to rent out the units call your preferred bank or credit union (preferably ones that do not have seasoning requirements) to start the refinance process. If you play your cards right then you can not only pull out the equity loan to purchase another property but, you can have positive cash flowing property due to the tenants still in the property. It is a double win and one of the best and oldest strategies out there.
Let’s do a recap of everything we just talked about.
First Step: Find a flip property that will have enough equity at the end of the flip for you to roll over into the next property.
Second step: Rehab property and rent units out to tenants
Third step: Get bank or credit union to refinance property
Fourth step: Take proceeds to roll into another property and continue the process
Simple yes indeed.
Here is the catch this process works great if the property has a good rent range, that will cover the refinanced mortgage amount. The last thing you want is to be stuck with a incredibly high mortgage monthly payment. Another tip is to use a property that you own free and clear to maximize equity amount. Please evaluate each property to make sure that this method will work for that property. There will be times that this method will not work and it may be best to do a traditional sell.