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Opened Jun 19, 2025 by Alisia Leon@alisialeon3418
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The BRRRR Real Estate Investing Method: Complete Guide


What if you could grow your real estate portfolio by taking the cash (typically, someone else's money) you utilized to buy one home and recycling it into another residential or commercial property, end over end as long as you like?

That's the premise of the BRRRR property investing technique.

It allows investors to buy more than one residential or commercial property with the same funds (whereas standard investing requires fresh cash at every closing, and hence takes longer to acquire residential or commercial properties).

So how does the BRRRR technique work? What are its benefits and drawbacks? How do you do it? And what things should you consider before BRRRR-ing a residential or commercial property?

That's what we'll cover in this guide.

BRRRR means buy, rehabilitation, rent, refinance, and repeat. The BRRRR method is acquiring appeal due to the fact that it permits investors to use the same funds to acquire several residential or commercial properties and therefore grow their portfolio faster than standard property financial investment approaches.

To begin, the investor discovers a bargain and pays a max of 75% of its ARV in cash for the residential or commercial property. Most lenders will just loan 75% of the ARV of the residential or commercial property, so this is essential for the refinancing phase.

( You can either utilize money, hard cash, or personal money to buy the residential or commercial property)

Then the financier rehabs the residential or commercial property and rents it out to tenants to develop consistent cash-flow.

Finally, the financier does what's called a cash-out refinance on the residential or commercial property. This is when a financial organization supplies a loan on a residential or commercial property that the investor currently owns and returns the cash that they utilized to purchase the residential or commercial property in the first place.

Since the residential or commercial property is cash-flowing, the investor is able to spend for this brand-new mortgage, take the money from the cash-out re-finance, and reinvest it into new units.

Theoretically, the BRRRR process can continue for as long as the investor continues to purchase smart and keep residential or commercial properties inhabited.

Here's a video from Ryan Dossey describing the BRRRR procedure for novices.

An Example of the BRRRR Method

To understand how the BRRRR procedure works, it might be valuable to walk through a quick example.

Imagine that you discover a residential or commercial property with an ARV of $200,000.

You anticipate that repair work expenses will have to do with $30,000 and holding costs (taxes, insurance, marketing while the residential or commercial property is uninhabited) will have to do with $5,000.

Following the 75% guideline, you do the following mathematics ...

($ 200,000 x. 75) - $35,000 = $115,000

You use the sellers $115,000 (the max deal) and they accept. You then discover a tough money loan provider to loan you $150,000 ($ 35,000 + $115,000) and give them a down payment (your own cash) of $30,000.

Next, you do a cash-out refinance and the new loan provider accepts loan you $150,000 (75% of the residential or commercial property's worth). You pay off the tough money loan provider and get your down payment of $30,000 back, which enables you to duplicate the procedure on a new residential or commercial property.

Note: This is just one example. It's possible, for instance, that you might obtain the residential or commercial property for less than 75% of ARV and wind up taking home additional cash from the cash-out re-finance. It's likewise possible that you might spend for all buying and rehab expenses out of your own pocket and after that recover that cash at the cash-out re-finance (instead of using personal cash or difficult money).

Learn How REISift Can Help You Do More Deals

The BRRRR Method, Explained Step By Step

Now we're going to stroll you through the BRRRR technique one step at a time. We'll explain how you can find bargains, safe funds, calculate rehab expenses, attract quality renters, do a cash-out refinance, and repeat the whole procedure.

The primary step is to discover bargains and acquire them either with cash, personal cash, or difficult cash.

Here are a couple of guides we've developed to assist you with offers ...

How to Find Property Deals Using Your Existing Data
The Ultimate Real Estate Investor Marketing Plan: Better Data, More Deals


We likewise recommend going through our 2 week Auto Lead Gen Challenge - it just costs $99 and you'll find out how to produce a system that creates leads using REISift.

Ultimately, you do not desire to purchase for more than 75% of the residential or commercial property's ARV. And ideally, you wish to purchase for less than that (this will result in money after the cash-out re-finance).

If you desire to find personal money to purchase the residential or commercial property, then try ...

- Reaching out to loved ones members
- Making the lending institution an equity partner to sweeten the offer
- Connecting with other company owner and financiers on social media


If you desire to find tough cash to buy the residential or commercial property, then try ...

- Searching for hard money lending institutions in Google
- Asking a realty agent who deals with financiers
- Requesting for recommendations to difficult money lenders from regional title business


Finally, here's a quick breakdown of how REISift can assist you find and secure more deals from your existing data ...

The next action is to rehab the residential or commercial property.

Your goal is to get the residential or commercial property to its ARV by spending as little money as possible. You absolutely do not wish to overspend on repairing the home, spending for additional appliances and updates that the home does not need in order to be marketable.

That doesn't mean you need to cut corners, however. Ensure you hire trustworthy professionals and fix whatever that needs to be repaired.

In the video listed below, Tyler (our creator) will show you how he approximates repair expenses ...

When purchasing the residential or commercial property, it's best to approximate your repair work costs a little bit greater than you expect - there are often unanticipated repairs that turn up throughout the rehab stage.

Once the residential or commercial property is totally rehabbed, it's time to discover renters and get it cash-flowing.

Obviously, you want to do this as rapidly as possible so you can refinance the home and move onto purchasing other residential or commercial properties ... but don't hurry it.

Remember: the top priority is to discover excellent renters.

We suggest using the 5 following criteria when thinking about occupants for your residential or commercial properties ...

1. Stable Employment
2. No Past Evictions
3. Good References
4. Sufficient Income
5. Good Financial History


It's much better to decline a renter due to the fact that they don't fit the above requirements and lose a few months of cash-flow than it is to let a bad tenant in the home who's going to trigger you issues down the roadway.

Here's a video from Dude Real Estate that provides some fantastic advice for discovering top quality occupants.

Now it's time to do a cash-out refinance on the residential or commercial property. This will allow you to pay off your difficult cash lender (if you utilized one) and recoup your own costs so that you can reinvest it into an extra residential or commercial property.

This is where the rubber meets the road - if you discovered a good deal, rehabbed it sufficiently, and filled it with top quality occupants, then the cash-out re-finance ought to go efficiently.

Here are the 10 finest cash-out re-finance lending institutions of 2021 according to Nerdwallet.

You may also discover a local bank that wants to do a cash-out re-finance. But keep in mind that they'll likely be a seasoning duration of at least 12 months before the lender wants to provide you the loan - preferably, by the time you're done with repair work and have actually discovered renters, this seasoning duration will be completed.

Now you repeat the process!

If you used a private money lending institution, they may be happy to do another handle you. Or you might utilize another difficult cash lending institution. Or you could reinvest your cash into a brand-new residential or commercial property.

For as long as whatever goes efficiently with the BRRRR method, you'll have the ability to keep acquiring residential or commercial properties without actually utilizing your own cash.

Here are some advantages and disadvantages of the BRRRR property investing method.

High Returns - BRRRR needs very little (or no) out-of-pocket money, so your returns ought to be sky-high compared to standard property financial investments.

Scalable - Because BRRRR allows you to reinvest the very same funds into new units after each cash-out re-finance, the design is scalable and you can grow your portfolio extremely rapidly.

Growing Equity - With every residential or commercial property you acquire, your net worth and equity grow. This continues to grow with appreciation and benefit from cash-flowing residential or commercial properties.
vodpod.com
High-Interest Loans - If you're utilizing a hard-money lending institution to BRRRR residential or commercial properties, then you'll likely be paying a high rates of interest. The goal is to rehab, rent, and re-finance as quickly as possible, but you'll usually be paying the tough cash loan providers for at least a year or so.

Seasoning Period - Most banks require a "seasoning duration" before they do a cash-out refinance on a home, which suggests that the residential or commercial property's cash-flow is steady. This is normally at least 12 months and in some cases closer to two years.

Rehabbing - Rehabbing a residential or commercial property has its threats. You'll need to deal with specialists, mold, asbestos, structural inadequacies, and other unforeseen problems. Rehabbing isn't for the light of heart.

Appraisal Risk - Before you buy the residential or commercial property, you'll wish to make sure that your ARV computations are air-tight. There's always a threat of the appraisal not coming through like you had actually hoped when refinancing ... that's why getting a bargain is so darn crucial.

When to BRRRR and When Not to BRRRR

When you're wondering whether you need to BRRRR a specific residential or commercial property or not, there are 2 concerns that we 'd recommend asking yourself ...

1. Did you get an outstanding offer?
2. Are you comfy with rehabbing the residential or commercial property?


The very first concern is crucial due to the fact that a successful BRRRR deal depends upon having actually found a good deal ... otherwise you might get in problem when you attempt to re-finance.

And the 2nd concern is necessary due to the fact that rehabbing a residential or commercial property is no small job. If you're not up to rehab the home, then you might think about wholesaling instead - here's our guide to wholesaling.

Wish to discover more about the BRRRR technique?

Here are some of our preferred books on the subjects ...

Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Residential Or Commercial Property Investment Strategy Made Simple by David M. Greene
The Book on Estimating Rehab Costs: The Investor's Guide to Defining Your Renovation Plan, Building Your Budget, and Knowing Exactly Just How Much All Of It Costs by J Scott
How to Buy Real Estate: The Ultimate Beginner's Guide to Starting by Brandon Turner
Final Thoughts on the BRRRR Method

The BRRRR approach is a great way to purchase property. It allows you to do so without utilizing your own cash and, more importantly, it allows you to recoup your capital so that you can reinvest it into new units.

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Reference: alisialeon3418/roomsandhouses#21