High property costs make it hard for city dwellers, particularly those on low salaries, to buy and own a home. As a result, the RUMAWIP program was formed to provide residents of the Federal Territory with comfortable, high-quality, and affordable housing. This is never meant to encourage anyone to use it as an investment. Nevertheless due to the 10 years clause of not allow to be sold, BRRRR strategy is a necessity given there is excess of supply of high rise residential in the city when the RUMAWIP owner no longer decide to stay in Federal Territories.
The BRRRR (buy, rehab, rent, refinance, repeat) strategy is a real estate investment approach that involves acquiring, renovating, and renting out properties (RUMAWIP is usually bare unit), then refinancing to free up capital for the next acquisition. This strategy allows investors to build a portfolio of rental properties while minimizing the amount of cash they have to put upfront.
Here’s how it works:
- Buy: The investor begins by identifying a property that has potential for appreciation and cash flow. This could be a fixer-upper that needs renovations or a rental property that is already generating income.
- Rehab: Once the property is acquired, the investor carries out any necessary renovations to increase its value and make it more attractive to renters. This could include cosmetic upgrades like painting and flooring, as well as more extensive repairs like plumbing or electrical work.
- Rent: Once the renovations are complete, the property is ready to be rented out. The investor sets a market rent and begins the process of finding tenants.
- Refinance: After the property has been rented for a period of time (usually six months to a year), the investor can apply for a mortgage refinance. By refinancing, the investor can typically access a larger loan amount, which can be used to pay off the original purchase price and any renovations. The investor is now left with a property that is generating positive cash flow, and the cash that was originally used to buy the property is freed up to be used for the next acquisition.
- Repeat: The investor can then repeat the process by using the freed-up cash to acquire and renovate another property, refinancing it to free up even more capital, and so on. (if one decided to purchase another property, he/she no longer can take on My First Home Scheme and must pay up 10% downpayment for new property purchase)
The BRRRR strategy is a way for investors to grow their rental property portfolio without having to come up with a large amount of cash upfront. It can also be a way to generate passive income and build wealth over time. In the RUMAWIP purchase, it is a backup plan when the purchased unit no longer suitable for the purchaser. Please take note that you are only allow to rent out to Malaysians within 10 years from S&P stamped date.
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