Updated: Dec 21, 2020
If you are a beginner real estate investor and you are thinking about doing the BRRRR method. DON’T. Let me explain why
Newbie investors get really excited at the prospect of making money with real estate... Ok I lied, not just newbies I get excited thinking about it too.
So, as a newbie, you probably started doing some research. What is the best way to start investing in real estate? If you are going to put a lot of money into a property, you want to make sure you find the most optimal way to do it.
You probably came across what’s known as the BRRRR method or BRRRR Strategy.
It stands for Buy, Rehab, Rent, Refinance, Repeat.
It's super popular because it promises a newbie investor that they can invest their initial money, get it all back (with sometimes even more) and then have a rental that cash flows you and you’ll be ready to buy the next house, all within a few months.
And that’s exactly what the method touts. It really has some huge advantages. Which sucks in all the beginners.
But with just like anything, making money quickly isn't always that easy.
So, if it's so good Antonio, why shouldn't I do it?
Beginners are afraid to invest because they are scared of spending their entire life savings and making a mistake on their first property that costs them tons of money.
They are overwhelmed with all the information and have no idea where to start first. Usually stuck in analysis paralysis.
If you decide to use the BRRRR strategy, you are choosing to make real estate investing way more difficult for you.
The BRRRR strategy combines two different strategies. Fixing and flipping and buy and hold investing.
Both of those strategies have different ways to calculate profit. Fixing and Flipping uses after repair value. Buying and Holding uses cash flow.
When you try and learn BRRRR as a beginner, you are automatically making it harder for you to start because now instead of becoming confident in your ability to just be able to calculate profit using cash flow you also need to learn ARV.
You are doubling the amount of information you need to learn and master before you feel “safe” buying that first property and knowing it will make you money.
Let me give you an example so you really understand what I am saying here.
Let’s say you wanted to lose weight. You set a goal to lose 10 pounds. That seems doable.
After going to all you can eat sushi and feeling you may have had one too many rolls, you say you should be losing more weight, so you are like instead I am going to lose 20 pounds.
That seems a lot farther away, more difficult to pull off. You might procrastinate, not workout or eat right because you are discouraged.
By choosing to BRRRR you are doing the same thing to yourself as a beginner.
Knowing you need to master a lot more information will scare a lot more people who would have invested and turned them into people who would not invest any more.
The best way to learn something is by doing. So what I recommend is, you start either first with fixing and flipping or buy and hold. Master and learn that formula. Once you have done that, buy your first property. See how it panned out.
Once you have done it once, then go ahead and learn the other one.
The goal here is to reduce that uncertainty, that fear that this might not work out. Simply, by making it easier to learn and master you will have a better shot.
The best way to do that is to get into action first. Reducing the information you need to master and lowering the barrier to entry.
I recommend that you start with buy and hold investing because it's the only one that builds passive income for you.
If you want to learn the exact steps that you need to take to buy your first investment property, then click the link below I created a 25 minute video training on how you can do that.