Fix & Flip vs. BRRRR: Which Real Estate Strategy Is Right for You?
Hey everyone, and happy New Year! Welcome back to the blog. Today, I want to go beyond the basics and really dig into two popular real estate investment strategies: fix and flip and the BRRRR method. I’m all about sharing the real details that people often gloss over so that we all get a clearer picture.
Fix and Flip: More Than Just a Quick Turnaround
Let’s start with the fix-and-flip approach. It’s a classic for a reason: you find a property that needs some work, fix it up, and sell it for a profit. But let’s get into the nitty-gritty. Often, fix-and-flip investors use a type of loan known as a hard money loan. These loans are great because they’re quick, but they do come with higher interest rates. Approximately 8% to 12% nationally, depending on your specific situation.
Let’s say you buy a fixer-upper for $150,000, put in $30,000 in renovations, and then sell it for $230,000. That’s a $50,000 potential gross profit before costs like closing fees and interest. It sounds pretty appealing, but you also have to factor in the renovation surprises that can pop up and the possibility that the market might shift while you’re mid-flip.
The BRRRR Method: Playing the Long Game
Now, let’s talk about the BRRRR method. It stands for Buy, Rehab, Rent, Refinance, Repeat. This strategy is a bit more of a long-term play. You might start with a conventional mortgage or a rehab loan, and interest rates here might be around 6% to 8%. After you’ve rehabbed the property and rented it out, you refinance based on the new appraised value. Usually, you can refinance up to about 75% to 80% of that new value. So if your property is worth $200,000 after the rehab, you might pull out $150,000 to $160,000. That gives you the capital to go and do it all again with another property.
Why These Details Matter
I’m sharing these details because I want this blog to be a place where we don’t just skim the surface. Whether you’re drawn to the quick turnaround of a fix and flip or the long-term wealth-building of the BRRRR method, it’s important to know the real numbers behind the strategies. I’m here to learn alongside you and share the full picture, so we all feel more prepared.
“By wisdom a house is built, and through understanding it is established.” — Proverbs 24:3