BRRRR vs House Flipping: Pros and Cons

BRRRR (Buy, Rehab, Rent, Refinance, Repeat) and house flipping are two great strategies in order to build a valuable asset and generate a great return on investment (ROI). These two strategies are extremely similar; They are both based around the idea that run down properties have the potential to be renovated and modified in order to make a profit. The major difference between the two in regard to the exit strategy and end goal of the investor. This being said, BRRRR is a way to generate long term cash flow and appreciation, whereas house flipping is a short-term strategy that involves fixing and flipping the house with the goal of reselling for a higher price.

BRRRR

The BRRRR method is a strategy that involves the following steps:

Buy: buy a property that is undervalued with the potential increasing its market value through renovations.

Renovate: process of fixing up the property with the end goal of increasing its value and turning it into an attractive and profitable rental property.

Rent: determine the rental price for its value and find tenants to rent the home.

Refinance: Refinance the property at a higher market value by using longer-term and traditional financing.

Repeat: Do it again! This is a great way to build your real estate portfolio by following the same steps and learning from your mistakes.

House Flipping

The house flipping method is a strategy that involves the following steps:

Research the market: Understand the environment and get to know the market in order to find properties that will generate a great opportunity for profit.

Buy a house: Once you know enough about the market, find a property and make sure to be ready when you are buying so that you can start getting the work done.

Resell: Sell the property at a higher and competitive price for a high ROI.

Pros and Cons

Now that you have a better understanding of both strategies, the next step is to choose the one that will work best for you. Each strategy comes with its own benefits but they also have their own set of challenges. By understanding the pros and cons of each strategy, this will allow you to help you decide which is best for you.

BRRRR: Pros and Cons

While there is a great possibility of building wealth and generating a steady income through positive monthly cash flows with this strategy, there are some challenges that may arise. Since this is a longer-term strategy, it will take a longer time to determine your return on investment and if what you are doing is bringing in positive cash flows. However, in comparison to house flipping, there are many pros that will help you cover the cost of the renovations and potential negative cash flows for certain months. This being said, with this strategy, you can rely on the passive income from the rental property to recover those costs, but you will need to face the responsibilities of being a landlord (If you want more information on the responsibilities of becoming a landlord, click here). Overall, this is a great strategy if you are looking to build wealth by having the ability to make passive income, increasing your rental portfolio while building equity during the flipping process and repeating when possible.

House Flipping: Pros and Cons

This strategy is great if you are looking for short-term investment, however, it is extremely important to understand that this can be very time consuming in order to find the ideal property. This strategy allows investors to get in and out of a deal quickly and with a set plan and budget which allows the investor to scale faster. The average time to flip a property is about six months, This being said, an experienced house flipper could be able to flip multiple properties in a year and more than one at a time in order to get a faster return on your money. However, as this may seem like a great idea to generate a high ROI rapidly, this comes with hard work and many challenges. Making these types of renovations can be much more complicated as you are trying to increase the market value of the property. In addition, you must take into consideration the closing costs of selling properties and the potential cash flow problems as you cannot rely on the rental income as seen with the BRRRR method. In the end, house flipping is a great strategy if you are looking to take the extra risk to build your wealth quicker.

In brief, if you are looking for the most cost-effective method, BRRRR is the strategy you should consider as it will grow your portfolio and generate incredible passive income. If you are looking to scale your wealth as quickly as possible, house flipping might be the answer for you as this will help you gain experience and create incredible income with a large return. Interested in knowing more? Do not hesitate to contact me if you have any questions or if you want to chat!