BRRRR

The BRRRR strategy —Buy, Rehab, Rent, Refinance, Repeat—is a powerful real estate investment strategy. It involves purchasing distressed properties, renovating them, renting them out, refinancing, and repeating the process. This continuous cycle allows investors to grow their portfolios and profits effectively.

Steps to Success with BRRRR:

Buy

Acquire distressed properties at lower prices due to their condition, positioning yourself for a higher return on investment. Use the 70% rule to leave a healthy 30% margin to cover unforeseen costs.

Rehab

Renovate the property to make it move-in ready, covering everything from structural repairs to aesthetic upgrades. Assess potential repair costs against profit margins before purchasing.

Rent

Rent the property to cover purchase and renovation costs. Rent should be at least 1% of the total investment (purchase price plus renovations). Ensure positive cash flow by comparing rental rates in the area.

Refinance

Refinance to cash out the equity built through renovations. A cash-out refinance replaces the original mortgage with a larger one, allowing you to pocket the difference as cash.

Repeat the Process

Use funds from the cash-out refinance to purchase and rehab another distressed property, continuing the cycle and expanding your investment portfolio.

BRRRR FAQ

1. What is the BRRRR strategy in real estate investing?

The BRRRR Method stands for Buy, Rehab, Rent, Refinance, Repeat. It’s a strategy where investors buy distressed properties at lower prices, renovate them to increase value, rent them out for income, refinance to cash out equity, and use those funds to purchase additional properties.

2. What is the 70% rule?

The 70% rule suggests that investors should pay no more than 70% of a property’s after-repair value (ARV) minus renovation costs. This provides a safety margin for unforeseen expenses and helps maximize profitability.

3. What is the 1% rule in real estate investing?

The 1% rule advises that monthly rent should be at least 1% of the total investment in the property, including purchase and renovation costs. This ensures rental income covers expenses and provides positive cash flow.

4. What types of properties are best when using the BRRRR strategy?

The best opportunities are found in properties that can be bought below market value and have potential for significant improvement. Residential properties such as single-family homes, multi-family properties, and small apartment buildings are ideal for the BRRRR strategy.