Real estate investing is a popular opportunity for many looking to enter the financial market. There are many different ways to invest in real estate, including house flipping and BRRRR, which stands for buy, rehab, rent, refinance, repeat. Each investment strategy can return a profit for investors, but the opportunities are quite different in theory and practice. Some of the main differences include how the return on investment is generated and reinvested.
House flipping, also known as fix and flip, involves purchasing a property at a price below market value. The most likely reason the property is offered below market price is that it needs or repairs or remodeling. The fix and flip owner refurbishes the home and sells it at a higher price. Care needs to be taken in this practice to make sure a profit is made. The cost of refurbishing the property should be kept in check so that the home can be sold for more than its initial investment. Some users of this strategy keep the profit for personal use while others put it back into another investment, including another house-flipping venture.
BRRRR is similar to fix and flip in that the ultimate goal is profit, and it involves refurbishing a property. However, the way profit is made with BRRRR is different. With BRRRR, the property is held rather than sold, and it is used to build an expanded portfolio of rentals. The profit is made by refinancing the refurbished rental property to purchase the next without needing to make a large down payment. With this method, a real estate portfolio can expand more quickly and begin generating passive income.
Those interested in investing in real estate may consider fix and flip, BRRRR, as well as other strategies. House flipping opportunities may suit an investor who is interested in contracting, decorating, or the entire hands-on process. The investment can pay off more quickly than other types, if executed correctly, and may be well suited to those wishing to make a smaller, short-term investment.
Initial, up-front investment is needed with BRRRR also. However, afterward, purchasing additional properties can be funded by refinancing the original property. The payoff may start slowly as passive income from rentals, but because BRRRR can facilitate a quick expansion of a portfolio, the profits can be much more significant in the end. This type of real estate investment may be well suited to those wishing to own multiple properties and manage renters.
Both house flipping and BRRRR can be fruitful money-making strategies in real estate. Because they are quite different in practice, they can be somewhat difficult to compare. Either opportunity can be profitable, making choosing one or the other more about personal preference.