Ultimate BRRRR Real Estate Investing Method Resource

Last Updated: February 2024

BRRRR Real Estate

BRRRR is a relatively newly coined acronym that stands for Buy, Rehab, Rent, Refinance, Repeat. The term has gained substantial popularity in the real estate investing community over the years. This method is like a hybrid of buy and hold, and fix and flip. This method combines the best of both worlds where the property is purchased below market value to fix up and force equity appreciation, however, you retain property ownership to rent out while pulling cash out to continue buying more.

What is BRRRR Real Estate Investing?

BRRRR Real Estate Investing Method Definition

BRRRR is an acronym for Buy, Rehab, Rent, Refinance, and Repeat, which is a real estate investment strategy that involves buying a distressed property, rehabbing it, renting it out, cash-out refinancing newly appreciated equity, and repeating the process to acquire more rental properties. The process is a common technique for investors to systematically grow their rental portfolio, as well as build wealth and cash flow through real estate.

What is the Difference between BRRR and BRRRR?

BRRR and BRRRR are acronyms used in real estate investing, which both describe the same strategy of “Buy, Rehab, Rent, Refinance”. They both refer to the same fundamental strategy, but the acronym BRRRR is more commonly used, which adds an extra R that stands for “Repeat”. This added step of  Repeating emphasizes the importance of using the refinanced capital (see step #4 below) to continue investing and building wealth.

Important BRRR Investor Terms

After Repair Value (ARV) – After repair value (ARV) is a term used in real estate investing to refer to the estimated value of a property after it has been fully renovated or repaired.

Cash Out Refinance – Cash out refinance is a financial real estate strategy where an investor refinances an existing mortgage, taking out more than the original loan amount and using the excess cash to fund new investments, renovations, or other expenses.

Can you BRRRR a Commercial Property?

Short answer – Yes. Although this method is commonly used for residential properties such as single family rentals or multifamily units,it can also be used for commercial rental properties such as retail shopping plazas, rental office buildings, and industrial rental properties. Commercial properties are very different from residential properties, so it is best to review and understand the different approaches to commercial property management, buying and selling commercial real estate, leasing out commercial real estate, and obtaining a commercial mortgage, before attempting to execute the BRRRR strategy on a commercial rental property.

How to do the BRRRR Investing Method?

The BRRR method is quite similar to the buy and hold investing method, but requires a few different steps after renting the property out. Below we take a look at each step of the BRRRR to understand each step required to take.

1. Buy

In order to start the BRRR process you will first have to purchase a rental property. Before actually purchasing the property, several prerequisites need to be met such as having already identified a target property, having a thorough understanding of rental real estate finance, sufficient down payment capital, good credit, and a solid business plan. When buying the property, the goal is to purchase the property below market value at 75% or below the property’s ARV (After Repair Value). Hitting this target ensures that there will be sufficient equity in the property after the rehab to satisfy lender requirements to do the cash out refinance. Below market value properties typically need updating and/or repairs, which we will cover below.

2. Rehab

BRRRR Real Estate Investing

When rehabbing a rental property, it is good practice to first plan out, budget, and get bids from contractors. Prioritizing any structural and safety repairs first (e.g. roofing, electrical, plumbing) should be a priority and are usually the most costly. Once any major repairs are taken care of, performing improvements that increase the most property value can be addressed. Value-add improvements include curb appeal jobs such as paint, landscaping, and other larger upgrades such as a new kitchen in multifamily rentals, windows, and parking lot. When rehabbing a rental property, the goal is to try to stay within your initial budget. It is very easy to go over budget, which can jeopardize the Refinance step of the BRRRR process.

3. Rent

Since banks and lenders typically prefer to lend on occupied properties, it will be important to rent out vacant units before refinancing (next step). The tenant selection process will depend if you are self managing or will hire a property management company. If self managing the rental property, then becoming familiar with self-management practices can be very valuable to selecting the most qualified tenants. If hiring a property management company, then they will handle the rental process for you, but will charge a fee for their services. In the rental step of the BRRRR process, it is important to ensure that the rent covers all expenses such as mortgage payments and any other overhead such as maintenance, property taxes, etc. Showing strong cash flow will greatly help you when you reach the Refinance step. When leasing out rental properties, the primary goal is to try to get the highest market rent from the most qualified tenant.

4. Refinance

Once the property has been rehabbed and successfully rented, you can proceed to the Refinance step of the BRRRR method. Refinancing involves a type of long-term loan called “cash-out refinance” that allows the investor to withdraw their equity and use that cash to the last step of the BRRRR method – Repeat (i.e. purchase another property). Different lenders will have different sets of requirements, however meeting basic criteria (depending on property type) should increase the odds of loan approval. Some basic criteria that a lender will look at includes borrowers credit score, ownership of the property for a minimum time period, possessing signed lease agreement(s), debt-service-coverage (DSCR) ratio, loan-to-value (LTV) ratio, and many other possible factors. When refinancing rental properties, the primary goal is to get the highest appraisal value of the property, while getting the best rate and terms on your loan.

5. Repeat

The final step of the BRRRR investing method is to take the newly obtained capital from the Refinance step, and use it to start the process all over again. This step is critical to continue building wealth, as it will be tempting to use that liquid capital to acquire non-appreciating assets  such as a new car or extended luxury vacation. The good news is that now that you have experience with the process, each subsequent go around should be easier as you can improve on past mistakes made in the process. Implementing systems such as property management softwares and strengthening contractor relations will only make this process easier.

BRRRR Real Estate Investing Tools and Resources

In the BRRRR strategy, the 70% rule is a common metric that states an investor should pay no more than approximately 70% of the home’s after repair value (i.e. the price it would likely sell for once rehab is completed).

Real Estate Listing Platforms

In the BRRRR strategy, buying undervalued properties, rehabbing them, and leasing out to tenants for rental income creates a steady cash flow, while selling after value appreciation can provide capital for further investments.

When utilizing the BRRRR strategy, obtaining a mortgage with favorable terms is crucial, as it allows investors to refinance and leverage the increased property value to access additional capital for reinvestment in new properties.

Rental Property Construction

In the BRRRR strategy, efficient and cost-effective construction during the rehabilitation phase is vital, as it increases the property’s value while minimizing expenses, ultimately maximizing the return on investment.

Rental Property Management

Effective property management is essential in the BRRRR strategy, as it ensures well-maintained properties, satisfied tenants, and a consistent rental income, all of which contribute to the long-term success of the investment.

Rental Real Estate Investor Tools

Investor tools, such as property software and financial calculators, can greatly aid in the BRRRR strategy by streamlining the evaluation process and help investors accurately project potential returns on investment.

Pros & Cons of the BRRRR Investing Method

While there are several benefits to the BRRRR real estate investing strategy, there are also some potential drawbacks that investors should be aware of. We take a look at the pros and cons of both below.

Pros of the BRRRR Method

  1. Monthly Cash Flow Income – Once the property is rented and stabilized, it should be generating (relatively) passive income. Thanks to the newly rehabbed condition, maintenance expenses should be minimized. Furthermore, if the initial analysis was performed correctly, the rents should be toward the top end of the market and ideally providing a profit every month.
  2. Build Wealth – The forced appreciation that was created by purchasing below market and rehabbing to improve the condition, should have created significant new equity in the property. If you continually execute step #5 of the BRRRR method – Repeat, then the amount of equity you can build up over many properties and years can grow to a sizable amount.
  3. Paying Less for Properties – Overall, if the BRRRR strategy is done correctly, you should end up paying less for a property than if you had bought it normally such as in a buy and hold. The imputed discount comes from 2 places: 1. Purchasing a distressed property at below market value, ideally at 75% of ARV. 2. Once you complete step #4 – Refinance, you pull back most of your initial capital, only leaving a small portion of your capital in the deal.

Cons of the BRRRR Method

  1. Rehab Efforts – Simply put, rehabbing a property is not an easy venture. Even for experienced practitioners, unexpected things always come up because each property is different with its own history. From finding qualified contractors, to discovering unexpected repairs such as mold or asbestos, property rehabs require dedication and perseverance.
  2. Difficult to Get Purchase Loan – Since BRRRR properties are usually in rough condition at the beginning, they are often more difficult to get conventional purchase loans. This leads many investors to turn to shorter term loans such as hard money loans. These “investor loans” often come with higher interest rates, which can push the property’s already negative cash flow even further downward.
  3. Longer Timeline – The whole BRRRR process takes time to see through – typically from 8 months to 18 months. Even in the best case scenario for a quick rehab, most lenders require a seasoning period of 6-12 months which lenders want to see proof of ownership and stabilized renters. This contrasts other quicker real estate investment strategies such as turnkey or house hacking.


How Does the BRRRR Method Compare to Other Real Estate Investment Strategies?

The BRRRR method focuses on acquiring distressed properties, renovating them, and then renting them out for long-term income. This method combines elements of flipping and long-term rental strategies, aiming to build an investor’s portfolio while recycling the initial capital across multiple projects.

Investment StrategyComparison with BRRRR Method
Buy and HoldBuy and hold focuses on acquiring and maintaining properties for long-term rental income and appreciation, with less emphasis on rehabbing. The BRRRR method adds the rehab and refinance steps to potentially increase property value and recover invested capital faster.
Ground-Up DevelopmentGround-up development involves constructing new properties, requiring significant capital and time, whereas the BRRRR method focuses on renovating existing properties, aiming for quicker returns on investment and the ability to reuse capital through refinancing.
House HackingHouse hacking allows investors to live in one part of their investment property while renting out the rest, reducing living expenses. The BRRRR method focuses on income generation and capital recycling in purely investment properties, without necessarily living on-site.
Fix and FlipFix and flip entails purchasing, rehabbing, and selling properties for a quick profit, focusing on short-term gains. In contrast, the BRRRR method includes holding and renting the property for ongoing income before refinancing, combining short-term and long-term investment benefits.
WholesalingWholesaling involves selling a property contract before purchase, requiring little to no capital. The BRRRR method requires capital for purchase and rehab, aiming for property ownership and long-term wealth creation through refinancing and renting.
Mortgage NotesInvesting in mortgage notes means earning income from loan interest without owning physical property. The BRRRR method focuses on tangible property investments, enhancing property value through rehab and generating rental income.
Turnkey RentalsTurnkey rentals are ready-to-rent properties requiring minimal initial effort, appealing for passive investors. The BRRRR method is more hands-on, involving active engagement in rehabbing and managing properties, with the added step of refinancing to recover capital.
NNN (Triple Net Lease)NNN leases typically involve commercial tenants responsible for most property expenses, offering investors a more hands-off approach. The BRRRR method, while offering passive rental income, requires active involvement in the rehab and refinancing processes.
SyndicationReal estate syndication pools investor money to buy larger properties than one could afford alone, offering passive investment opportunities. The BRRRR method is more hands-on and individualistic, with investors directly involved in the property’s rehab and management.
Real Estate StocksInvesting in real estate stocks or REITs provides exposure to real estate markets without direct property management, suitable for those seeking liquidity and diversification. The BRRRR method offers more control and potential for higher returns, with greater hands-on involvement.

More Rental Real Estate Investments

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