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

That's the facility of the BRRRR property investing method.

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

So how does the BRRRR approach work? What are its advantages and disadvantages? 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, re-finance, and repeat. The BRRRR method is acquiring popularity since it allows investors to utilize the same funds to purchase numerous residential or commercial properties and therefore grow their portfolio more rapidly than traditional real estate investment methods.

To begin, the genuine estate financier discovers a great deal and pays a max of 75% of its ARV in cash for the residential or commercial property. Most lenders will only loan 75% of the ARV of the residential or commercial property, so this is necessary for the refinancing phase.

( You can either utilize money, tough money, or private money to acquire the residential or commercial property)

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

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

Since the residential or commercial property is cash-flowing, the financier is able to pay 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 investor continues to buy wise and keep residential or commercial properties occupied.

Here's a video from Ryan Dossey explaining the BRRRR process for novices.

An Example of the BRRRR Method

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

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

You expect that repair costs will have to do with $30,000 and holding costs (taxes, insurance coverage, marketing while the residential or commercial property is uninhabited) 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 tough money loan provider to loan you $150,000 ($ 35,000 + $115,000) and provide a deposit (your own cash) of $30,000.

Next, you do a cash-out refinance and the new lender consents to loan you $150,000 (75% of the residential or commercial property's worth). You settle the hard money lender and get your deposit of $30,000 back, which allows you to repeat the process on a brand-new residential or commercial property.

Note: This is simply one example. It's possible, for example, that you might acquire the residential or commercial property for less than 75% of ARV and end up taking home money from the cash-out refinance. It's also possible that you could pay for all getting and rehabilitation costs out of your own pocket and after that recover that cash at the cash-out re-finance (rather than utilizing personal money or hard cash).

Learn How REISift Can Help You Do More Deals

The BRRRR Method, Explained Step By Step

Now we're going to walk you through the BRRRR technique one action at a time. We'll discuss how you can discover bargains, safe funds, determine rehab expenses, attract quality occupants, do a cash-out refinance, and repeat the entire process.

The initial step is to find bargains and purchase them either with cash, private money, or hard cash.

Here are a couple of guides we've created to help you with discovering top quality deals ...

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


We likewise recommend going through our 14 Day Auto Lead Gen Challenge - it only costs $99 and you'll learn how to develop 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 acquire for less than that (this will result in additional money after the cash-out refinance).

If you want to find private money to buy the residential or commercial property, then try ...

- Reaching out to family and friends members
- Making the loan provider an equity partner to sweeten the deal
- Networking with other company owner and investors on social networks


If you desire to discover tough money to acquire the residential or commercial property, then try ...

- Searching for hard cash loan providers in Google
- Asking a real estate representative who works with financiers
- Asking for recommendations to difficult money lending institutions from regional title business


Finally, here's a fast breakdown of how REISift can assist you find and protect more offers from your existing data ...

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 definitely don't wish to overspend on repairing the home, spending for extra devices and updates that the home doesn't require in order to be marketable.

That doesn't imply you must cut corners, though. Make sure you work with reliable contractors and repair whatever that requires to be repaired.

In the video below, Tyler (our creator) will reveal you how he approximates repair work costs ...

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

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

Obviously, you wish to do this as rapidly as possible so you can re-finance the home and move onto purchasing other residential or commercial properties ... however don't rush it.

Remember: the concern is to find good occupants.

We advise using the 5 following criteria when considering 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 much better to turn down an occupant because they don't fit the above criteria and lose a few months of cash-flow than it is to let a bad renter in the home who's going to cause you problems down the road.

Here's a video from Dude Real Estate that offers some fantastic recommendations for finding premium tenants.

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 money lending institution (if you used one) and recoup your own expenses so that you can reinvest it into an additional residential or commercial property.

This is where the rubber satisfies the road - if you found an excellent offer, rehabbed it sufficiently, and filled it with top quality tenants, then the cash-out re-finance must go smoothly.

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

You might also find a local bank that wants to do a cash-out refinance. But bear in mind that they'll likely be a seasoning duration of at least 12 months before the lender wants to offer you the loan - preferably, by the time you're finished with repairs and have actually discovered tenants, this flavoring period will be completed.

Now you duplicate the process!

If you used a private cash lending institution, they may be going to do another deal with you. Or you might utilize another hard cash lending institution. Or you could reinvest your money into a new residential or commercial property.

For as long as whatever goes efficiently with the BRRRR method, you'll be able to keep acquiring residential or commercial properties without really using your own money.

Here are some advantages and disadvantages of the BRRRR real estate investing approach.

High Returns - BRRRR needs really little (or no) out-of-pocket money, so your returns should be sky-high compared to traditional realty investments.

Scalable - Because BRRRR allows you to reinvest the exact same funds into brand-new systems after each cash-out re-finance, the model is scalable and you can grow your portfolio really rapidly.

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

High-Interest Loans - If you're using a hard-money lending institution to BRRRR residential or commercial properties, then you'll likely be paying a high rates of interest. The objective is to rehab, lease, and refinance as quickly as possible, but you'll generally be paying the tough money lending institutions for at least a year approximately.

Seasoning Period - Most banks require a "seasoning duration" before they do a cash-out re-finance on a home, which shows that the residential or commercial property's cash-flow is stable. This is normally a minimum of 12 months and sometimes closer to 2 years.

Rehabbing - Rehabbing a residential or commercial property has its risks. You'll have to handle specialists, mold, asbestos, structural inadequacies, and other unexpected issues. Rehabbing isn't for the light of heart.

Appraisal Risk - Before you purchase the residential or commercial property, you'll want to make certain that your ARV estimations are air-tight. There's constantly a risk of the appraisal not coming through like you had hoped when re-financing ... that's why getting a bargain is so darn important.

When to BRRRR and When Not to BRRRR

When you're wondering whether you ought to BRRRR a particular residential or commercial property or not, there are two 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 very first question is necessary because a successful BRRRR deal hinges on having actually discovered a good deal ... otherwise you might get in trouble when you try to refinance.

And the 2nd concern is essential because rehabbing a residential or commercial property is no little job. If you're not up to rehab the home, then you may think about wholesaling instead - here's our guide to wholesaling.

Wish to find out more about the BRRRR approach?

Here are a few of our favorite books on the topics ...

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 Everything Costs by J Scott
How to Purchase Real Estate: The Ultimate Beginner's Guide to Beginning by Brandon Turner
Final Thoughts on the BRRRR Method

The BRRRR method is a great method to purchase genuine estate. It allows you to do so without utilizing your own money and, more significantly, it enables you to recoup your capital so that you can reinvest it into new units.
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