The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is a proven real estate investment strategy that helps investors build wealth through rental properties.
Quick Overview of BRRRR Method Steps
- Buy – Purchase distressed properties below market value
- Rehab – Renovate to increase property value
- Rent – Find quality tenants for steady cash flow
- Refinance – Cash-out refinance to recover investment
- Repeat – Use recovered funds for next property
Step 1: Buy
Focus on finding properties 20-30% below market value through foreclosures, short sales, or off-market deals.
Best Places to Find Deals:
- Multiple Listing Service (MLS)
- Real estate wholesalers
- Foreclosure auctions
- Direct mail campaigns
- Real estate networking events
Step 2: Rehab
Renovations should focus on improvements that boost property value and attract quality tenants.
Priority Improvements | Expected ROI |
---|---|
Kitchen updates | 70-80% |
Bathroom remodels | 60-80% |
Fresh paint | 50-100% |
New flooring | 70-80% |
Step 3: Rent
Screen tenants thoroughly using credit checks, employment verification, and references.
Rental Price Formula:
Monthly rent should be at least 1% of the total property investment (purchase price + renovation costs).
Step 4: Refinance
Wait 6-12 months after property purchase to pursue a cash-out refinance.
Refinancing Requirements:
- Seasoning period (typically 6 months)
- Credit score above 680
- Debt-to-income ratio below 45%
- Proof of rental income
Step 5: Repeat
Use the cash from refinancing as a down payment on your next investment property.
Common BRRRR Method Mistakes to Avoid
- Underestimating renovation costs
- Overpaying for initial purchase
- Insufficient cash reserves
- Poor contractor management
- Rushing the refinance process
Tools and Resources
- Property analysis calculators (BiggerPockets)
- Renovation cost estimators (HomeAdvisor)
- Real estate investment groups
- Local real estate agent networks
Contact local real estate investment associations or visit BiggerPockets to connect with experienced BRRRR investors in your area.
Advanced BRRRR Strategy Tips
Market Analysis
Research local market trends, employment rates, and population growth to identify promising investment areas.
Building Your Team
- Real estate agent specializing in investment properties
- Experienced general contractor
- Property manager
- Real estate attorney
- Mortgage broker familiar with BRRRR refinancing
Financial Considerations
Funding Sources
- Hard money loans
- Private money lenders
- Home equity lines of credit (HELOC)
- Partnership arrangements
Key Financial Metrics
Metric | Target Range |
---|---|
Cash-on-cash return | 8-12% |
Cap rate | 6-8% |
After Repair Value (ARV) | 70-75% rule |
Conclusion
The BRRRR method remains one of the most effective strategies for building long-term wealth through real estate investing. Success requires careful market research, strong team building, and disciplined execution of each step in the process. While challenges exist, proper planning and risk management can lead to substantial portfolio growth over time.
Action Steps to Get Started
- Set investment goals and timeline
- Build cash reserves
- Network with local real estate professionals
- Research target markets
- Create detailed business plan
FAQs
- What exactly is the BRRRR method in real estate investing?
The BRRRR method stands for Buy, Rehab, Rent, Refinance, Repeat. It’s a real estate investment strategy where investors buy distressed properties, renovate them, rent them out to tenants, refinance to recover their initial investment, and then repeat the process with another property. - How much money do I need to start using the BRRRR method?
You typically need 20-25% of the purchase price plus renovation costs. This can vary based on market conditions, property condition, and lending requirements. Hard money lenders might require 10-15% down but charge higher interest rates. - What’s the average timeline for a BRRRR project?
A typical BRRRR project takes 6-12 months total: 1-2 months to purchase, 2-4 months for renovation, 1-2 months to find tenants, and 2-3 months for seasoning before refinancing. - How do I calculate the After Repair Value (ARV) accurately?
ARV is calculated by analyzing comparable properties (comps) that have sold within the last 3-6 months, within a 1-mile radius, with similar features and condition to your planned renovation. - What’s the 70% rule in BRRRR investing?
The 70% rule states that investors should not pay more than 70% of the ARV minus repair costs. This provides a safety margin and ensures enough equity for refinancing. - Which repairs add the most value in a BRRRR renovation?
Kitchen and bathroom updates, flooring replacement, fresh paint, roof repairs, and HVAC upgrades typically provide the best return on investment in BRRRR renovations. - What type of refinancing is best for the BRRRR method?
A cash-out conventional refinance is typically best, with rates around 30-year fixed conventional loans. Some investors use portfolio lenders or commercial loans depending on their situation. - How long do I need to wait before refinancing a BRRRR property?
Most lenders require a seasoning period of 6-12 months before allowing a cash-out refinance. Some portfolio lenders might offer shorter seasoning periods. - What are the biggest risks in the BRRRR strategy?
Major risks include underestimating renovation costs, overestimating ARV, market downturns affecting refinancing, extended vacancy periods, and failing to qualify for refinancing. - How do I find good BRRRR properties?
Find properties through foreclosures, auctions, wholesalers, MLS listings, direct mail marketing to distressed property owners, and networking with real estate agents who specialize in investment properties.