BRRRR Method Explained

The BRRRR method is a real estate investment strategy that allows you to recycle your capital and grow your portfolio faster than traditional buy-and-hold.

What is BRRRR?

B - Buy (at a discount) R - Rehab (force appreciation) R - Rent (stabilize income) R - Refinance (pull out capital) R - Repeat (do it again)

How BRRRR Works

Traditional Investing

Buy property: $100,000

Down payment (25%): $25,000

Capital locked in property

Buy next property: Need another $25,000

BRRRR Investing

Buy distressed property: $70,000 cash

Rehab: $20,000

All-in: $90,000

After Repair Value (ARV): $120,000

Refinance at 75% LTV: $90,000 cash out

Capital recovered: $90,000

Repeat with same capital

Step-by-Step Breakdown

1. Buy

Find properties below market value:

Distressed sellers

Estate sales

Off-market deals

Foreclosures

Target: Purchase + rehab at 70-75% of ARV

2. Rehab

Focus on value-adding improvements:

Kitchen updates

Bathroom renovations

Flooring

Paint

Curb appeal

Avoid over-improving for the neighborhood.

3. Rent

Get the property occupied:

Price competitively to fill fast

Screen tenants thoroughly

Document property condition

Establish good tenant relationship

4. Refinance

After 6-12 months seasoning:

Get new appraisal (should reflect improvements)

Cash-out refinance at 70-80% LTV

Recover your initial capital

Property now cash flows with new loan

5. Repeat

Use recovered capital to buy next property.

BRRRR Math Example

Purchase:

Distressed property: $65,000

Rehab budget: $25,000

Closing/holding costs: $5,000

Total investment: $95,000

After Rehab:

ARV: $130,000

Monthly rent: $1,300

Refinance (75% LTV):

New loan: $97,500

Cash out: $97,500

Money left in deal: -$2,500 (you made money!)

Cash Flow:

Rent: $1,300

Mortgage (97.5k @ 7%): -$650

Expenses (45%): -$585

Monthly cash flow: $65

Result: Infinite return (no money in deal) + $65/month + equity growth

Keys to BRRRR Success

1. Buy Right

Your profit is made at purchase. Don't overpay.

2. Accurate ARV

Get comps before buying. Overestimating ARV kills deals.

3. Control Rehab Costs

Get multiple bids. Build contractor relationships.

4. Quick Execution

Time is money. Fast rehabs reduce holding costs.

5. Strong Rent

Refinance appraisals consider income. Higher rent = higher value.

BRRRR Risks

Overestimating ARV

Underestimating rehab costs

Market downturn after rehab

Appraisal coming in low

Extended vacancy

Interest rate changes

Is BRRRR Right for You?

BRRRR works best if you:

Have cash or access to hard money

Can find off-market deals

Have rehab experience or good contractors

Understand your market's ARV values

Can handle project management stress

It's more work than turnkey investing, but the returns can be significantly higher for those who execute well.