What if you could grow your realty portfolio by taking the cash (typically, another person’s money) you used to buy one home and recycling it into another residential or commercial property, end over end as long as you like?

That’s the property of the BRRRR realty investing method.

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

So how does the BRRRR method work? What are its pros and cons? How do you do it? And what things should you think about before BRRRR-ing a residential or commercial property?

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

BRRRR stands for buy, rehabilitation, rent, refinance, and repeat. The BRRRR technique is acquiring popularity since it allows financiers to utilize the very same funds to buy multiple residential or commercial properties and hence grow their portfolio faster than standard property investment approaches.

To begin, the investor discovers a great offer and pays a max of 75% of its ARV in money 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 cash, hard cash, or private cash to purchase the residential or commercial property)

Then the investor rehabs the residential or commercial property and leas it out to tenants to create consistent cash-flow.

Finally, the investor does what’s called a cash-out re-finance on the residential or commercial property. This is when a monetary institution supplies a loan on a residential or commercial property that the financier currently owns and returns the money that they used to purchase the residential or commercial property in the first location.

Since the residential or commercial property is cash-flowing, the financier has the ability to pay for this new mortgage, take the money from the cash-out refinance, and reinvest it into brand-new units.

Theoretically, the BRRRR process can continue for as long as the financier continues to buy clever and keep residential or commercial properties inhabited.

Here’s a video from Ryan Dossey describing the BRRRR procedure for newbies.

An Example of the BRRRR Method

To comprehend how the BRRRR procedure works, it might be useful to stroll through a quick example.

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

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

Following the 75% guideline, you do the following math …

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

You provide the sellers $115,000 (limit offer) and they accept. You then discover a difficult cash loan provider to loan you $150,000 ($ 35,000 + $115,000) and provide a down payment (your own cash) of $30,000.

Next, you do a cash-out re-finance and the brand-new lending institution consents to loan you $150,000 (75% of the residential or commercial property’s value). You settle the difficult cash loan provider and get your deposit of $30,000 back, which permits you to duplicate the process on a brand-new residential or commercial property.

Note: This is simply one example. It’s possible, for circumstances, that you could get the residential or commercial property for less than 75% of ARV and wind up taking home additional money from the cash-out re-finance. It’s likewise possible that you could spend for all getting and rehabilitation costs out of your own pocket and after that recover that cash at the cash-out re-finance (instead of using personal money or tough 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 describe how you can discover excellent offers, safe and secure funds, determine rehab costs, draw in quality tenants, do a cash-out re-finance, and repeat the entire process.

The initial step is to discover great deals and purchase them either with cash, personal cash, or hard money.

Here are a few guides we’ve developed to assist you with discovering high-quality deals …
ohiorealtors.org
How to Find Real Estate Deals Using Your Existing Data
The Ultimate Real Estate Investor Marketing Plan: Better Data, More Deals


We also advise going through our 14 Day Auto Lead Gen Challenge - it only costs $99 and you’ll learn how to develop a system that generates leads using REISift.

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

If you wish to discover private cash to buy the residential or commercial property, then attempt …

- Reaching out to loved ones members
- Making the lending institution an equity partner to sweeten the offer
- Networking with other service owners and financiers on social networks


If you wish to discover hard cash to purchase the residential or commercial property, then attempt …

- Searching for tough cash loan providers in Google
- Asking a realty agent who works with financiers
- Requesting for referrals to difficult money lending institutions from regional title companies


Finally, here’s a fast breakdown of how REISift can assist you discover and secure more offers from your existing data …

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

Your objective is to get the residential or to its ARV by spending as little cash as possible. You absolutely don’t desire to spend beyond your means on repairing the home, paying for additional home appliances and updates that the home doesn’t need in order to be valuable.

That doesn’t mean you ought to cut corners, however. Make sure you work with trustworthy contractors and repair everything that needs to be repaired.

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

When purchasing the residential or commercial property, it’s best to estimate your repair work costs a bit greater than you anticipate - there are practically constantly unforeseen repair work that turn up throughout the rehabilitation stage.

Once the residential or commercial property is fully rehabbed, it’s time to discover tenants and get it cash-flowing.

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

Remember: the priority is to find excellent renters.

We suggest using the 5 following requirements when thinking about renters 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 better to decline a renter due to the fact that they don’t fit the above criteria and lose a couple of months of cash-flow than it is to let a bad occupant in the home who’s going to trigger you problems down the roadway.

Here’s a video from Dude Real Estate that offers some great recommendations for discovering high-quality tenants.

Now it’s time to do a cash-out refinance on the residential or commercial property. This will enable you to pay off your tough cash lender (if you utilized one) and recover your own expenses so that you can reinvest it into an extra residential or commercial property.

This is where the rubber fulfills the road - if you found a bargain, rehabbed it adequately, and filled it with high-quality renters, then the cash-out refinance ought to go smoothly.

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

You may also find a local bank that’s prepared to do a cash-out refinance. But keep in mind that they’ll likely be a seasoning duration of a minimum of 12 months before the loan provider wants to offer you the loan - ideally, by the time you’re made with repairs and have found tenants, this flavoring duration will be ended up.

Now you duplicate the procedure!

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

For as long as everything goes smoothly with the BRRRR technique, you’ll have the ability to keep purchasing residential or commercial properties without really using your own money.

Here are some benefits and drawbacks of the BRRRR realty investing method.

High Returns - BRRRR requires very little (or no) out-of-pocket money, so your returns must be sky-high compared to traditional property investments.

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

Growing Equity - With every residential or commercial property you purchase, your net worth and equity grow. This continues to grow with appreciation and earnings from cash-flowing residential or commercial properties.

High-Interest Loans - If you’re utilizing a hard-money lender to BRRRR residential or commercial properties, then you’ll likely be paying a high rates of interest. The objective is to rehab, rent, and refinance as quickly as possible, but you’ll normally be paying the tough money lending institutions for a minimum of a year or so.

Seasoning Period - Most banks need a “flavoring period” before they do a cash-out re-finance on a home, which indicates that the residential or commercial property’s cash-flow is steady. This is typically at least 12 months and often closer to two years.

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

Appraisal Risk - Before you buy the residential or commercial property, you’ll wish to ensure that your ARV estimations are air-tight. There’s always a danger of the appraisal not coming through like you had actually hoped when re-financing … that’s why getting a good deal is so darn essential.

When to BRRRR and When Not to BRRRR

When you’re questioning whether you must BRRRR a particular residential or commercial property or not, there are 2 concerns that we ’d advise asking yourself …

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


The first concern is very important since an effective BRRRR deal depends upon having found a good deal … otherwise you might get in difficulty when you try to refinance.

And the 2nd concern is necessary since rehabbing a residential or commercial property is no small task. If you’re not up to rehab the home, then you may consider wholesaling rather - here’s our guide to wholesaling.

Want to find out more about the BRRRR method?

Here are some of our favorite 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 It All Costs by J Scott
How to Buy Real Estate: The Ultimate Beginner’s Guide to Beginning by Brandon Turner
Final Thoughts on the BRRRR Method

The BRRRR approach is a fantastic method to buy realty. It permits you to do so without utilizing your own money and, more notably, it enables you to recoup your capital so that you can reinvest it into new systems.