What if you could grow your property portfolio by taking the money (typically, somebody else's money) you utilized to acquire one home and recycling it into another residential or commercial property, end over end as long as you like?
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That's the premise of the BRRRR realty investing technique.

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

So how does the BRRRR approach 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, rehab, lease, re-finance, and repeat. The BRRRR approach is getting popularity due to the fact that it allows financiers to use the same funds to buy multiple residential or commercial properties and therefore grow their portfolio faster than standard property financial investment approaches.

To start, the genuine estate investor finds a great deal and pays a max of 75% of its ARV in cash for the residential or commercial property. Most lending institutions will only loan 75% of the ARV of the residential or commercial property, so this is important for the refinancing stage.

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

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

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

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

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

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

An Example of the BRRRR Method

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

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

You prepare for that repair costs will be about $30,000 and holding expenses (taxes, insurance coverage, marketing while the residential or commercial property is vacant) will be about $5,000.

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

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

You provide the sellers $115,000 (limit deal) and they accept. You then discover a hard cash lender to loan you $150,000 ($ 35,000 + $115,000) and provide them a deposit (your own cash) of $30,000.

Next, you do a cash-out re-finance and the new lender consents to loan you $150,000 (75% of the residential or commercial property's worth). You pay off the tough money lender and get your deposit of $30,000 back, which permits you to duplicate the process on a new residential or commercial property.

Note: This is just one example. It's possible, for example, that you could obtain the residential or commercial property for less than 75% of ARV and end up taking home extra cash from the cash-out refinance. It's likewise possible that you could pay for all buying and rehab costs out of your own pocket and then recover that money at the cash-out refinance (rather than using personal cash or hard 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 approach one step at a time. We'll discuss how you can find excellent deals, protected funds, determine rehab expenses, attract quality renters, do a cash-out re-finance, and repeat the entire process.

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

Here are a few guides we've developed to help you with finding top quality offers ...

How to Find Property 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 just costs $99 and you'll discover how to develop a system that produces leads using REISift.

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

If you desire to discover private cash to purchase the residential or commercial property, then attempt ...

- Reaching out to loved ones members
- Making the loan provider an equity partner to sweeten the deal
- Networking with other service owners and investors on social networks


If you desire to discover hard money to purchase the residential or commercial property, then attempt ...

- Searching for difficult cash lenders in Google
- Asking a property agent who deals with investors
- Requesting for referrals to difficult money loan providers from local title business


Finally, here's a fast breakdown of how REISift can assist you discover and secure more offers from your existing information ...

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

Your objective is to get the residential or commercial property to its ARV by investing as little cash as possible. You certainly don't desire to overspend on fixing the home, paying for additional appliances and updates that the home doesn't need in order to be marketable.

That does not suggest you should cut corners, however. Make sure you employ trustworthy specialists and fix everything 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 estimate your repair work costs a bit greater than you expect - there are often unexpected repair work that show 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 wish to do this as quickly as possible so you can re-finance the home and move onto purchasing other residential or commercial properties ... however do not rush it.

Remember: the concern is to discover good renters.

We advise utilizing the 5 following requirements 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 since 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 cause you problems down the roadway.

Here's a video from Dude Real Estate that provides some excellent advice for finding premium renters.

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

This is where the rubber satisfies the roadway - if you discovered a great offer, rehabbed it adequately, and filled it with high-quality occupants, then the cash-out re-finance ought to go smoothly.

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

You might also discover a local bank that wants to do a cash-out refinance. But remember that they'll likely be a flavoring duration of at least 12 months before the lender is willing to give you the loan - preferably, by the time you're finished with repairs and have found tenants, this seasoning period will be completed.

Now you repeat the procedure!

If you used a personal cash loan provider, they might be happy to do another deal with you. Or you could use another tough cash lending institution. Or you might reinvest your cash into a new residential or commercial property.

For as long as everything goes smoothly with the BRRRR approach, you'll have the to keep purchasing residential or commercial properties without actually utilizing your own money.

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

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

Scalable - Because BRRRR permits you to reinvest the exact same funds into new units after each cash-out re-finance, the model is scalable and you can grow your portfolio extremely quickly.

Growing Equity - With every residential or commercial property you acquire, your net worth and equity grow. This continues to grow with gratitude and make money from cash-flowing residential or commercial properties.

High-Interest Loans - If you're utilizing a hard-money loan provider to BRRRR residential or commercial properties, then you'll likely be paying a high interest rate. The objective is to rehab, rent, and refinance as rapidly as possible, but you'll normally be paying the difficult money lenders for at least a year or two.

Seasoning Period - Most banks require a "flavoring duration" before they do a cash-out refinance on a home, which indicates that the residential or commercial property's cash-flow is stable. This is usually a minimum of 12 months and in some cases closer to two years.

Rehabbing - Rehabbing a residential or commercial property has its threats. You'll have to handle professionals, 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 ensure that your ARV estimations are air-tight. There's always a threat of the appraisal not coming through like you had hoped when re-financing ... that's why getting a good deal 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 questions that we 'd advise asking yourself ...

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


The very first question is essential due to the fact that a successful BRRRR deal hinges on having actually found a good deal ... otherwise you might get in problem when you attempt to refinance.

And the 2nd question is very important since rehabbing a residential or commercial property is no little task. If you're not up to rehab the home, then you might consider wholesaling instead - here's our guide to wholesaling.

Wish to discover more about the BRRRR technique?

Here are a few 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 How Much It All Costs by J Scott
How to Purchase Real Estate: The Ultimate Beginner's Guide to Getting going by Brandon Turner
Final Thoughts on the BRRRR Method

The BRRRR approach is a fantastic way to purchase property. It allows you to do so without utilizing your own money and, more importantly, it enables you to recoup your capital so that you can reinvest it into brand-new systems.