Using Creative Financing With the BRRRR Method

Real estate is one of the most popular investments in the world, and for good reason. Believe it or not, there are over 22 million independent landlords in the US, making it one of the most attainable ways for economic mobility.

Well, all you need is funding to get started, and if you follow the right tips, you may not need that much! Let’s talk about some clever ways to fund your real estate project with the BRRRR method today!

What Is the BRRRR Method?

Briefly, let’s first define the method we need funding for. BRRRR is an acronym (buy, rehab, rent, refinance, repeat) that has become a popular strategy for real estate investors, as it’s said to be the quickest and most affordable way to build a real estate business from scratch. At least, on paper.

Like any investment, nothing is guaranteed, but this strategy has withstood the test of time, and why wouldn’t it? Buying a fixer-upper and doing the repairs yourself could save you tens of thousands of dollars and increase your buying power. After a cash-out refinance, you’ll be ready to repeat the entire process.

This only takes a couple of years at most between each investment property, which is one reason why BRRRR is so effective. Of course, there is one glaring obstacle that stands in the way for many investors, and that’s funding. However, many savvy investors have found some clever ways around this. Here are some examples!

1. Real Estate Bridge Loan

On this list, we will discuss plenty of creative options to choose from that will work for specific scenarios. However, we first want to discuss the gold standard. Real estate bridge loans are the best solution for nearly every investor, as they are designed for fixer-upper properties.

More specifically, let’s talk about bridge mortgages. The creativity is on the lenders’ part here, as these loans are specifically designed for the BRRRR method, offering you a gap (or bridge) before you start making payments to allow time for necessary repairs.

The only downside of these loans is that they typically come with higher interest rates. However, if you don’t have the funding you need to complete the project, this can be a great option for you!

2. HELOC

A home equity line of credit or HELOC is a revolving credit line similar to a credit card, but it uses your existing home equity as collateral. For example, let’s say you make a 25% down payment on a fixer-upper worth $200,000. In that case, you may take out a HELOC for up to $40,000, which is 80% of your existing equity.

If you know that repairs are limited, then this may be a reasonable option. However, the main downside is that if you just purchased the home recently, you probably don’t own much equity. Get an estimate on the repairs to see if this is right for you.

HELOCs are revolving lines of credit, so this won’t interfere with your cash-out refinance, later on, assuming you can make payments on your balance. HELOCs are very similar to credit cards, just with a lower interest rate (on average), so don’t get yourself trapped into debt you can’t handle. However, if you don’t have a large home repair bill, then a HELOC is a perfect way to only spend what you need!

3. Crowdfunding

Crowdfunding your real estate projects can be a great way to generate the cash that you need to grow your portfolio. It’s also a very convenient option, as investors know that real estate is the best investment around today, and there are plenty of platforms you can use to pitch to them.

However, you do need to keep in mind that this option comes with a lot of fees. The crowdfunding platform you use will take a fee, you will likely need a securities attorney who will charge a fee, and other expenses are likely. For example, you may need to build a website, spend on marketing, and more.

Also, learning how to be a landlord is a large enough task. It requires a diverse skillset of repairing leaks to understanding tenant law for the states where you operate. On top of that, you will need to learn some basic securities laws and remain compliant with their regulations.

4. Home Depot Project Loans

Home Depot is one of the largest companies in the world by revenue and they supply goods to thousands of private renovators and construction companies. Well, they found another way to make money, by offering loans to those companies!

These loans are designed to help you through the construction process, mainly by purchasing all of your equipment through their store. If you’ve already secured a mortgage for your home, then this could potentially be a great option for financing with the BRRRR method.

Keep in mind that they aren’t just giving away these loans. They typically start at 7.99% which may continue to rise with inflation. If you have a $50,000 limit, this could add another $4,000 to your bill for every year you don’t repay it.

However, if you don’t have any other options, then this could be a great solution. If you’re able to pay the loans back in a reasonable amount of time, then you won’t have to worry about the interest too much.

Make Money With the BRRRR Method Today

Now that you know some clever BRRRR method financing tips, choose which one works best for you and find a lender today! There’s a reason that the method is so popular, so give it a try and see for yourself!

Stay up to date with our latest financial news and feel free to contact us with any questions or for help with your financing needs!

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