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?

That's the facility of the BRRRR genuine estate investing method.
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It allows investors to buy more than one residential or commercial property with the same funds (whereas traditional investing requires fresh money at every closing, and therefore takes longer to acquire residential or commercial properties).

So how does the BRRRR approach work? What are its benefits and drawbacks? 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 means buy, rehab, lease, refinance, and repeat. The BRRRR approach is acquiring popularity due to the fact that it enables investors to use the same funds to buy numerous residential or commercial properties and thus grow their portfolio quicker than conventional property investment techniques.

To start, the investor finds a bargain and pays a max of 75% of its ARV in money 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 very important for the refinancing phase.

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

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

Finally, the investor does what's called a cash-out re-finance on the residential or commercial property. This is when a banks supplies a loan on a residential or commercial property that the investor already owns and returns the money that they utilized to acquire the residential or commercial property in the first place.

Since the residential or commercial property is cash-flowing, the financier has the ability to spend for this new mortgage, take the money 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 wise 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 understand how the BRRRR procedure works, it might be useful to walk through a quick example.

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

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

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

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

You offer the sellers $115,000 (the max offer) and they accept. You then discover a tough money lender 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 new lending institution accepts loan you $150,000 (75% of the residential or commercial property's worth). You settle the difficult cash loan provider and get your down payment of $30,000 back, which permits you to repeat the procedure on a brand-new residential or commercial property.

Note: This is just one example. It's possible, for example, that you might get the residential or commercial property for less than 75% of ARV and end up taking home additional money from the cash-out refinance. It's likewise possible that you might spend for all getting and rehabilitation expenses out of your own pocket and then recoup that cash at the cash-out re-finance (rather than utilizing personal cash or tough cash).

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 action at a time. We'll describe how you can find bargains, safe and secure funds, compute rehab expenses, attract quality renters, do a cash-out re-finance, and repeat the whole procedure.

The first action is to find excellent offers and purchase them either with money, personal money, or difficult cash.

Here are a few guides we have actually produced to help you with discovering top quality offers ...

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 2 week Auto Lead Gen Challenge - it just costs $99 and you'll learn how to develop a system that produces leads utilizing REISift.

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

If you wish to find personal cash to acquire the residential or commercial property, then attempt ...

- Reaching out to family and friends members
- Making the loan provider an equity partner to sweeten the deal
- Connecting with other business owners and investors on social networks


If you want to discover difficult money to buy the residential or commercial property, then attempt ...

for tough money lending institutions in Google
- Asking a genuine estate agent who deals with investors
- Requesting recommendations to difficult cash lending institutions from local title business


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

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

Your goal is to get the residential or commercial property to its ARV by investing as little money as possible. You definitely don't desire to spend too much on fixing the home, paying for additional home appliances and updates that the home doesn't need in order to be valuable.

That does not mean you need to cut corners, though. Make sure you hire credible contractors and repair whatever that requires to be fixed.

In the video below, Tyler (our founder) will show you how he approximates repair costs ...

When buying the residential or commercial property, it's best to estimate your repair work costs a little bit higher than you expect - there are generally unexpected repair work that show up throughout the rehab stage.

Once the residential or commercial property is totally rehabbed, it's time to discover occupants and get it cash-flowing.

Obviously, you desire to do this as rapidly as possible so you can refinance the home and move onto buying other residential or commercial properties ... however do not rush it.

Remember: the top priority is to find excellent renters.

We advise utilizing the 5 following requirements when considering tenants 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 turn down an occupant 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 renter in the home who's going to cause you issues down the road.

Here's a video from Dude Real Estate that offers some terrific advice for discovering top quality occupants.

Now it's time to do a cash-out refinance on the residential or commercial property. This will allow you to settle your tough money lending institution (if you used one) and recover your own costs so that you can reinvest it into an additional residential or commercial property.

This is where the rubber satisfies the road - if you discovered a great offer, rehabbed it effectively, and filled it with top quality renters, then the cash-out refinance need to go efficiently.

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

You may also discover a local bank that wants to do a cash-out re-finance. But bear in mind that they'll likely be a seasoning duration of a minimum of 12 months before the lending institution is willing to give you the loan - preferably, by the time you're done with repairs and have actually discovered occupants, this spices duration will be completed.

Now you duplicate the procedure!

If you utilized a personal money lender, they might be going to do another offer with you. Or you might utilize another hard cash loan provider. Or you might reinvest your money into a brand-new residential or commercial property.

For as long as everything goes efficiently with the BRRRR technique, you'll be able to keep acquiring residential or commercial properties without really utilizing your own cash.

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

High Returns - BRRRR needs very little (or no) out-of-pocket money, so your returns need to be sky-high compared to standard genuine estate investments.

Scalable - Because BRRRR allows you to reinvest the same funds into new systems 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 appreciation and make money from cash-flowing residential or commercial properties.

High-Interest Loans - If you're using a hard-money loan provider to BRRRR residential or commercial properties, then you'll likely be paying a high rates of interest. The goal is to rehab, rent, and re-finance as quickly as possible, however you'll normally be paying the hard cash lenders for at least a year or so.

Seasoning Period - Most banks need a "spices period" before they do a cash-out re-finance on a home, which shows that the residential or commercial property's cash-flow is steady. This is normally at least 12 months and often closer to two years.

Rehabbing - Rehabbing a residential or commercial property has its risks. You'll have to handle professionals, mold, asbestos, structural inadequacies, and other unanticipated 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 risk of the appraisal not coming through like you had hoped when refinancing ... that's why getting a bargain is so darn essential.

When to BRRRR and When Not to BRRRR

When you're wondering whether you must BRRRR a particular residential or commercial property or not, there are 2 questions that we 'd advise asking yourself ...

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


The first question is very important because a successful BRRRR deal hinges on having actually discovered an excellent offer ... otherwise you might get in trouble when you attempt to refinance.

And the 2nd concern is necessary due to the fact that rehabbing a residential or commercial property is no small 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 subjects ...
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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 Purchase Real Estate: The Ultimate Beginner's Guide to Getting Started by Brandon Turner
Final Thoughts on the BRRRR Method

The BRRRR technique is an excellent way to purchase real estate. It enables you to do so without utilizing your own money and, more significantly, it permits you to recover your capital so that you can reinvest it into new units.