One of the best ways to invest in Boston real estate with little to no money out of your own pocket, is the BRRR strategy. BRRR stands for Buy, Renovate, Rent & Refinance. With this strategy the goal is to buy single or multifamily homes that need significant work. You would then renovate this property and bring it to current rental standards. Once the property is fully rehabbed, and rented, you would seek out permanent bank financing to pay off your construction financing.
Part 1: The goal is to create enough equity via your rehab, and to stabilize the property with tenants, that the banks will not require a down payment when you attempt to refinance. An ideal situation is laid out below.
Purchase Price – $350,000
Rehab Cost – $130,000
Financing Cost – $20,000
Total Invested = $500,000 (Refinance Amount)
ARV = $625,000
$500/ $625 = .80 or 80% LTV
Part 2: The second part of the equation, is making sure that your rents fully cover your monthly debts after refinancing. In other words you need your income to exceed your expenses and to producing cash flow for the banks to consider this a good loan. The numbers should look similar to below.
Total Rents Collected – $6,000 Monthly
Mortgage Payment – $2,000
Taxes & Insurance – $1,500
Other Cost = $500
Total Monthly Cost = $4,000
$6000 Rents – $4000 Expenses = $2000 Monthly Cash Flow
Want to see a current BRRR project in process? Come check out our latest 3 family investment as we prepare to bring this rental property back to life! This is a buy and hold deal that’s getting a full rehab. During the property tour we’ll explain:
• Exactly how we acquired the property
• How we raised the capital to purchase
• Our rehab budget & plans for the units
• Our timeline & issues we’ve had along the way
• Rental expectations & cash flow projections
For more details and to RSVP to the meeting, please visit the link below. Hope to see you there!