Quiz: Investment Strategies | Learn

1. The BRRRR strategy stands for:

Buy, Rent, Resell, Repeat, RetireBuy, Rehab, Rent, Refinance, RepeatBorrow, Repair, Rent, Refinance, ReturnBuy, Renovate, Resell, Rebuy, Repeat

BRRRR: Buy undervalued, Rehab to increase value, Rent to stabilize income, Refinance to pull out your capital (based on the new higher appraised value), Repeat with the recycled capital. Done right, you recover most or all of your initial investment and keep the asset.

2. The primary risk of a fix-and-flip strategy is:

You can never sell the propertyRenovation costs exceed budget and/or the market softens before you sell, erasing your marginFlipping is illegal in most statesYou cannot get insurance on flip properties

Flips carry execution risk (rehab cost overruns, timeline delays) and market risk (values drop while you're holding). Every month you hold costs you in interest, taxes, and insurance. If your renovation runs 30% over budget or the market dips 10%, your profit can evaporate.

3. Buy-and-hold investing builds wealth primarily through:

Quick resale profitsMonthly cash flow, principal paydown by tenants, appreciation, and tax benefits compounding over timeAvoiding all expensesGovernment subsidies

Buy-and-hold generates returns from four sources simultaneously: monthly cash flow, mortgage principal paydown (equity buildup), property appreciation, and tax advantages (depreciation, deductions). These compound over decades. Most real estate wealth is built by holding, not flipping.

4. Short-term rentals (Airbnb/VRBO) can generate higher gross income than long-term rentals, but the tradeoff includes:

Lower property taxesHigher operating expenses, occupancy volatility, regulatory risk, and more active managementLess furniture neededGuaranteed 100% occupancy

STRs have higher revenue potential but also higher expenses (furnishing, cleaning, utilities, supplies, platform fees), demand volatility (seasonality, competition), regulatory risk (cities banning or restricting STRs), and management intensity. Net margins may not beat long-term rentals after accounting for all costs.

Back to lesson Next lesson →