BUY: When buying, it is very important to look for a property that can be bought for less than the market price. Apartments that are in poor condition may well be available at a discount e.g. from death estates that are looking for a quick deal. Profitable apartments may be hard to find because they are often in high demand. Being swift is key, and therefore you should do your homework carefully. Get to know the local market and pay close attention to the housing company and its current state. If the affordable price stems from issues with the housing company, the investment is not necessarily profitable.
REHAB: In the rehab stage, it is important to make sure that the increase in value is higher than the amount of money used for the renovation. Even a minor, skillfully performed surface renovation may increase the value of an apartment. As a landlord, you should keep in mind that renovation expenses are not tax-deductible if the work was performed before you started your lease operation for the apartment in question. Therefore, it is a good strategy to schedule any renovation to a time when a lease ends, before entering into a new agreement with a new tenant. More information on taxation is available here.
RENT: Once the apartment has been renovated, it is time to look for a tenant. A renovated apartment appeals to a larger number of applicants and allows you to ask for higher rent, too.
REFINANCE: Refinancing is the most essential feature of the BRRRR strategy and the one that allows you to grow your portfolio. The resale value of the apartment that was initially bought at an affordable price has increased in value by way of renovation – or even at the time of purchase, in a best-case scenario. At this point, you should request an estimate from a real estate agent that can then be provided to your bank. You can then use the increased collateral value as collateral when buying your next apartment.
REPEAT: After your first successful BRRRR, you can do it again! Simply buy, rehab, rent, refinance and repeat.