'BRRRR' Washington DC Real Estate Investment Strategy
Breaking down house hacking in the District of Columbia
Scaling With Equity
Section: Investor Intel
Author: Susan Isaacs, Washington DC Real Estate Strategist
How can I scale my Washington DC real estate investment portfolio without flipping?
By starting with the purchase of a single family home house hack, scaling it to rental property using BRRRR, and continuing the practice over a period of years, increasing the size and value of each property purchased (and therefore its potential).
What Is The BRRRR Strategy?
‘BRRRR’ is an acronym for Buy Rehab Rent Refinance Repeat, a long-established real estate investment strategy. It is a form of Buy And Hold, branded with the handy acronym by Brandon Turner of BiggerPockets.
The strategy involves purchasing a property in need of rehab at under-market value, renovating, renting it and effecting a cash-out refinance in order to purchase another property, then repeating the process with each additional property, retaining all until it is beneficial to divest.
Why Use The BRRRR Strategy?
BRRRR is a form of ‘Buy & Hold that allows investors to quickly scale up their real estate investment portfolios using equity as a funding source.
Caveats to this strategy include:
The investor must purchase homes at below-market value
The investor must understand renovation costs and the process, and have the respources to employ it efficiently
The property must increase sufficiently in value to warrant a cash-out refinance
The property must be rented at a rate that effets positive cash flow
This strategy works well for investors familiar with home renovation and its costs. In addition to the purchase price, down payment, loan amount, and closing costs for the initial property, the following expenses will need to be factored in:
Carrying Costs
Rehab Costs
This will allow you to calculate your potential After Repair Value (ARV).
The investor then must determine rental value once the property is rehabbed, and factor rental costs into the overall equation.
Financing Advantages
Standard financing options apply to BRRRR property purchases. Once the investor is able to show increased appraisal value for the property and verified rental income, the property can be refinanced up to 75% of its appraised value, in most cases. Factor in:
Down Payment
Refinancing Costs
Interest Rate and loan terms
Will the rent paid by tenants cover overhead?
What type of properties are best for BRRRR strategy?
Condos | Co-Ops
Condos and cooperatives are poor candidates for BRRRR due to rental restriction rules, association dues, and their lower appreciation rate compared to other property types.
You’ll need a BBL license and certificate of occupancy. Read the rules here.
Single Family
Single family homes are great candidates for ‘BRRRR.’ Investors may encounter competition from house flippers. Carefully evaluate the home’s structural integrity.
You’ll need a BBL license and certificate of occupancy. Read the rules here.
Multifamily
Multifamily dwellings can be excellent ‘BRRRR’ assets.
From 2 unit single family, duplex, triplex and fourplex to apartment buildings, look for multifamily properties in desirable locations, in good structural condition. Carefully calculate renovation costs for the overall property and individual units.
You’ll need a BBL license and certificate of occupancy for each unit. Read the rules here.
Other Types Of Investment Properties In DC
House Hacking
Buy And Hold (can be a house hack)
BRRRR (a type of Buy And Hold)
Fix And Flip
Multifamily
The DC Real Estate Investment Compass
Zuzu Notes:
Timing and planning your house hack often involves scaling. Many property owners initially begin with a basement rental in the home they occupy, later lease the upper floor, then expand to other methods. Or simply repeat!
Start With The Basics
Whether you’re investing in DC real estate as a side hustle or full-time business, understanding the local real estate market and fundamentals is key.
How I Help
Guidance and education
Off-market opportunities
Skill, experience and resources
Assembling A Team
Having a team of professionals in place will ease acquisition and management of your investment portfolio.
Your Realtor, lenders, property manager, contractors and vendors functioning as a team can identify opportunities, speed transitions, address issues, and increase profitability.