Ep 62: How Your First Short-Term Rental Can Fund All the Others… Bringing the BRRRR METHOD to Airbnb and VRBO Investing

If you’re still on the fence about whether a vacation rental is right for you in your income portfolio, take a listen to today’s episode.

In it, I unpack how we as short-term rental owners, or STR owners, can utilize a strategy that’s known and loved in the long-term rental world… the BRRRR Method.


Ep 62 - How your first short-term rental can fund all the others Bringing BRRRR method to your Aribnb and VRBO Business.png


If you’re not familiar with the BRRRR Method, I explain at a high-level what it is, and then dig into how each of the steps can apply to the STR world.

Finally, I share an example with simplified numbers to walk you through the power of this BRRRR Method in the vacation rental world.

And if you’re interested in learning more about HOW to actually bring a vacation rental into your life as a part of your income portfolio, I’ve created something else just for you.

It’s called The 6-Figure Vacation Rental Roadmap and I’m putting on the finishing touches right now!

So, if you’d like to be the first to know when this program is live, head over to ginnytownsend.com/rental and save your place in line.

And if you’re curious about how much you could potentially earn with an Airbnb in your area, I can send you a free and pretty powerful tool to help you estimate…

Visit GinnyTownsend.com/estimate to claim access to this powerful free tool!

Thanks for joining me, and until next time, continue to be up and to the right.


What’s up, Podcast Nation! Ginny Townsend here and thank you so much for joining me for another episode today. I am incredibly excited to talk about this topic because what I think is beautiful and unique about real estate is I mean, there are many things let’s be real but as it pertains to this episode your first investment property can effectively become the Golden Goose that lays the golden eggs to fund your subsequent properties beautiful, right so you can start with

One and grow, you know, add the second one and the third one and fourth one at pretty consistent rates all with really the benefit of that first Air B&B property going live. And so what I the method I’m going to talk about today that if you are in any other real estate investment circles, you’ve probably heard this acronym and it is called the Burr method and it is

Build BRRRR. So for ours and This Acronym stands for BUY, REHAB, RENT, REFINANCE, REPEAT. Yes, and so it can apply to several different kinds of real estate investment. And I just think it’s a great fit for the short term rental market. So I’m going to go through what each of how each of these letters in the acronym can apply to you and then I’ll give you an example.

Sample, and then I’ll share with you some pros. And then what I’m calling things to consider because they’re not really cons there. Just if you know there you can plan for it and it’s just not an issue. Okay. So let’s go through the acronym with starting with by so typically investment properties do require some kind of a down payment now depending on where you’re choosing to find your financing different requirements will apply and there are

This is this right here is it could be a couple of different podcast episodes, but that’s broad Strokes. That’s kind of what you’re looking at. And so there are three different sources of funding for buying that I think are worth mentioning here and one of them the first one would be local banks versus like the enormous ones right local banks you have just

a better opportunity to make build relationships and have more guests flexibility because you’re a little bit more of a bigger fish in a smaller Pond versus the enormous ones. I just I mean you can always try right but I I do love the idea of working with local banks and then there are actually because this the short-term rental market has matured since Airbnb really took it on.

To most people’s Radars starting back in 2008. So because this Market has matured some specific Solutions have come up to serve this Market including lenders that specialize in short-term rentals and vacation rentals. And so just a simple Google you’ll you’ll find there’s probably four or five that I keep finding on searches when I’ve been looking at I don’t yet want to make a recommendation.

Emendation because I’m still I have not used any of these but if you just simply Google short-term rental lending, you will find a lot and it appears that they have a really easy process has to go through and use like to get quotes on your specific situation. So it’s incredible, right and they understand you don’t have to explain the business model. They understand the business model, right? They’re very familiar with it, which if if a bank isn’t familiar if you know

Source of lending isn’t familiar with a certain model that is viewed as risk, right additional risk. And so you can take away that potential barrier by going straight to a source that understands the market and then the third source of funding that I really like when it comes to short-term rentals vacation rentals is what’s called seller financing and this really pertains to property.

Beware the owner the current owner who you would be buying from owns it outright and they can effectively become your bank and provide your financing. So there is typically some kind of down payment it is less than what maybe more conventional loan down payment can be as low as 5 or 10% and then you just pay them month after month there. Are you

Are so many different schools of thought on this but if it’s the way that can help you get your first rental property incredible. So I mean typically interest rates will be a little higher. But again, you’ll be getting you’ll be acquiring the Golden Goose. So it might be worth the cost. Right? So those are the three sources of funding that I like to look at for short-term rentals. Okay. Now, let’s do that’s by

Bye now rehab is the first are in the Burr method and that’s where we as Real Estate Investors add value. So often times it is. I mean, it doesn’t have to be a gut job, by the way, it can be a little bit of cleaning up of little bit of lipstick some updating. I mean some you you know that like there are some things that just go a long way like new light fixtures new paint.

Some new kitchen cabinets or something like that the it doesn’t have to be a gut job but a really key part in this process is adding value to the property that you acquired quite then the next are in the Burr method is rent. So you rent it out. That’s when you actually put it on Airbnb VRBO booking.com all of the places that you want to have your your property online.

To try to find guests you rent it out and typically for the Burr method if this is done for at least one year before you move to the next are which is refinance. Like I said, this can take 1 plus years from when you started renting it out and why I say 1 plus is depending on the lender who would refinance the loan.

Some require a longer term track record of rent to refinance. So yeah, you may find one as early as a year, maybe even sooner than that, you know and but this is also again a time where if a lender doesn’t understand the short term rental market they may ask for a longer time Horizon of your rental track record, which makes sense, right because any unknown is just viewed as a risk. So if

Get rid of that risk by going to someone who knows who understands the short term rental market. That’s just that’s just an easier win for you. And so what happens this is a very magical phase in the process of the Burr method is and I’ll go through an example don’t worry. But like this is where you’re able to withdraw some cash theoretically to be able to use as your next down payment for your next property.

30 okay, and then the final are is repeat. So that’s pretty much what I just said is you once you’ve drawn the cash out you find your next rental property by it with the cash that you financed out and bring that one online and then after a year or so you refinance that and draw out the down payment for your next property and so on. Okay. So those are each of the steps.

Explained but let me actually pull in some real numbers to explain the process. Okay. So let’s say you found a rental property for $200,000. Let’s just use round numbers to make this this easier to understand right and you were able to make a $40,000 down payment. So that’s a 20% down payment and you have a loan on the place for a hundred and sixty thousand dollars.

Then you put in about ten thousand dollars bringing the property up. So that’s your rehab right? So you bought it your rehab is you’re adding value you updating it and then then once it’s been rehabbed you actually put it online to rent. Okay, then after about a year, you can go get your the appraisal.

Done to see like okay how much value was added to this property with your rehab and and also a little bit of time right? And let’s say the appraisal comes in at 250 thousand dollars. So like I said about a year after you’ve started renting you are able to refinance the loan for a 74 75 percent of the appraised value.

You so that loan would be for a hundred and eighty seven thousand five hundred then you use that amount to pay off the original hundred and sixty thousand dollar loan leaving you with twenty seven thousand five hundred dollars in your pocket. So that’s called a Cash out refinance. So you can use that $27,500 to purchase and Rehab another property. So that’s how your first property.

Be can become your Golden Goose that keeps producing those golden eggs over time and one of my one of my favorite quotes, I believe it’s a Chinese proverb, but you never know like sometimes they’re attributed. I have I have anyway, whatever regardless the quote is the best time to plant a tree is twenty years ago. The next best time is today. And so

I mean for many reasons that I love that quote but here’s the thing time is going to pass either way, right? It’s just going to pass whether you invest in a property or not. So my take is might as well be nurturing that Golden Goose. It’s not it’s not a process that will allow you to acquire a thousand rental properties in your first year, but I don’t know if you want to acquire a thousand rental properties in

First year this is what I love about this process many of the things I love about this process is one it is like I said, you’re creating your nurturing your Golden Goose to help you finance and fund future rental properties future vacation rental property is even but it also allows you time to learn before you scale. So it is I think much better to have those real life experiences where the rubber meets the road of having a vacation rental.

Or any kind of a rental when you just have one and then you figure out okay. These are my processes. These are these are my exact systems. And then when you do the Cash out refinance and you get your second property, you can take all of those learnings you acquired from your first property and bring them over to your second and that’s why I said earlier. It is incremental after your first property is done and you’ve you know, you put the time in

You actually buying your first one and then learning the processes and just making sure things are really streamlined for what works best for you and your goals.

And then acquiring the subsequent ones you just bring the systems over you bring the the funding from your Golden Goose over to your next properties and the effort is what becomes incremental and the revenue is not incremental right? It goes up at a factor of however many rental properties you have so I really like this strategy for all.

Remember really all real estate investment at least, you know single family, but I think it is particularly useful for vacation rentals and short-term rentals as well. Now some pros for using this method because again, I’m not giving you advice. I don’t know what your situation is or what your goals are. I’m just trying to provide as much information as I can to help you to be able to act on what your goals are so some pros.

Your first property like I’ve been saying is essentially a Golden Goose that will pay for your future properties. Yes. Your initial investment is effectively recycled on future properties. How elegant is that? I am so drawn to simple and elegant and then just it is beautiful. Yeah, there are steps. Yeah. I know there’s probably some hoops to jump through whatever but it is as elegant as that. Your initial investment is effectively recycled on future.

Produce so really all you’ll need to do is just come up with the first down payment beautiful right now some things to think about. Like I said, I’m not going to call these cons because if you’re aware of them, they’re not cons. Right some things to think about is you’ll need to be able to add some kind of value for this to be a really strong play so that could be some minor.

Rehab or it could be some extensive. So just being aware of your comfort level of the project you want to take on to add value to renovate the the property. That’s just something that you’ll need to decide what’s right for you and your lifestyle and your goals, right? So tempting something to think about you certainly would need to be aware of that before jumping in.

Which also leads me to my other thing that I think is really worthwhile. Thinking about is the appraisal. So you’ll I mean the whole point of this is to see an increase in value from an appraisal. So taking into consideration that you’ll need to be the one adding the value and I think you know over time with inflation and all of that the actual dollar amount that houses are worth naturally does increase

But you’ll want it to probably beat inflation, right? So relying on the appraisal as a key figure for determining the cash that you’ll be able to pull out of the deal. I mean that’s you know, you’re you’re putting a lot of weight. You’re really relying on the appraisal. But again, if you know, you can add a lot of value and you know, you’re able to complete a renovation whatever level of

Asian right to to add value to your property that you can rent out and then obviously look for Lending source to refinance and then repeat. It’s just not a big thing right as long as you know that those are some really important pillars in the process. So what do you think do you think the Burr strategy could work for you as you grow your vacation rental Empire? Let me know what you think. Please come over to Instagram my handle is it’s Ginny town.

Anton and DM me I’d love to hear what you think about it. So continue to be up into the right until the next time we talk.

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