What if you could grow your realty portfolio by taking the money (typically, someone else's cash) 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 property investing method.

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

So how does the BRRRR technique work? What are its pros and cons? How do you do it? And what things should you consider before BRRRR-ing a residential or commercial property?

That's what we'll cover in this guide.
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BRRRR represents buy, rehab, lease, re-finance, and repeat. The BRRRR approach is gaining appeal because it enables financiers to utilize the exact same funds to purchase numerous residential or commercial properties and thus grow their portfolio quicker than standard realty financial investment approaches.

To begin, the real estate financier discovers a bargain and pays a max of 75% of its ARV in cash for the residential or commercial property. Most lenders will just loan 75% of the ARV of the residential or commercial property, so this is very important for the refinancing stage.

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

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

Finally, the investor does what's called a cash-out refinance on the residential or commercial property. This is when a financial institution provides a loan on a residential or commercial property that the investor already owns and returns the cash that they used to acquire the residential or commercial property in the very first place.

Since the residential or commercial property is cash-flowing, the investor is able to pay for this new mortgage, take the cash from the cash-out re-finance, and reinvest it into 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 explaining the BRRRR procedure for beginners.

An Example of the BRRRR Method

To understand how the BRRRR process works, it may be handy to stroll through a fast example.

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

You anticipate that repair work costs will be about $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% guideline, you do the following mathematics ...

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

You use the sellers $115,000 (limit offer) and they accept. You then find a hard cash lending institution 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 refinance and the brand-new loan provider consents to loan you $150,000 (75% of the residential or commercial property's value). You settle the hard cash loan provider and get your deposit of $30,000 back, which allows you to duplicate the process on a new residential or commercial property.

Note: This is simply one example. It's possible, for circumstances, that you could obtain 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 might spend for all getting and rehab costs out of your own pocket and after that recoup that money at the cash-out re-finance (instead of utilizing private 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 walk you through the BRRRR method one action at a time. We'll discuss how you can discover excellent offers, protected funds, calculate rehabilitation expenses, bring in quality occupants, do a cash-out refinance, and repeat the whole process.

The very first action is to find bargains and purchase them either with cash, personal money, or tough cash.

Here are a couple of guides we have actually created to help you with discovering high-quality deals ...

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


We likewise recommend going through our 2 week Auto Lead Gen Challenge - it just costs $99 and you'll find out how to develop a system that generates leads using REISift.

Ultimately, you don't desire to buy for more than 75% of the residential or commercial property's ARV. And preferably, you desire to purchase for less than that (this will lead to money after the cash-out refinance).

If you desire to discover personal cash to acquire the residential or commercial property, then attempt ...

- Reaching out to pals and family members
- Making the lender an equity partner to sweeten the deal
- Networking with other company owner and financiers on social media


If you desire to find hard money to buy the residential or commercial property, then try ...

- Searching for hard money lending institutions in Google
- Asking a realty agent who deals with investors
- Asking for referrals to difficult cash loan providers from regional title companies


Finally, here's a quick breakdown of how REISift can help you discover and secure 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 spending as little cash as possible. You definitely do not desire to spend beyond your means on fixing the home, paying for additional home appliances and updates that the home doesn't need in order to be valuable.

That doesn't suggest you ought to cut corners, however. Ensure you professionals and fix everything that needs to be repaired.

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

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

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

Obviously, you want to do this as rapidly as possible so you can re-finance the home and move onto acquiring other residential or commercial properties ... but don't hurry it.

Remember: the top priority is to find great renters.

We advise using the 5 following requirements when considering 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 better to reject a tenant because they do not fit the above criteria and lose a couple of months of cash-flow than it is to let a bad tenant in the home who's going to cause you issues down the road.

Here's a video from Dude Real Estate that provides some terrific suggestions for finding top quality tenants.

Now it's time to do a cash-out refinance on the residential or commercial property. This will enable you to settle your tough cash lending institution (if you utilized one) and recover 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 a bargain, rehabbed it adequately, and filled it with top quality occupants, then the cash-out re-finance need to go smoothly.

Here are the 10 finest cash-out refinance 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 spices duration of at least 12 months before the lender wants to give you the loan - ideally, by the time you're done with repairs and have actually discovered tenants, this spices period will be ended up.

Now you duplicate the process!

If you used a private cash loan provider, they might be happy to do another handle you. Or you could utilize another tough cash lending institution. Or you might reinvest your money into a new residential or commercial property.

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

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

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

Scalable - Because BRRRR enables you to reinvest the same funds into new units after each cash-out refinance, the model is scalable and you can grow your portfolio really rapidly.

Growing Equity - With every residential or commercial property you purchase, 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 lending institution to BRRRR residential or commercial properties, then you'll likely be paying a high rates of interest. The goal is to rehab, lease, and re-finance as quickly as possible, but you'll usually be paying the tough money lending institutions for a minimum of a year or two.

Seasoning Period - Most banks require a "flavoring period" 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 often closer to 2 years.

Rehabbing - Rehabbing a residential or commercial property has its dangers. You'll have to handle contractors, mold, asbestos, structural insufficiencies, and other unforeseen problems. Rehabbing isn't for the light of heart.

Appraisal Risk - Before you buy the residential or commercial property, you'll desire to make sure that your ARV estimations are air-tight. There's constantly a danger of the appraisal not coming through like you had actually hoped when refinancing ... that's why getting a great deal is so darn crucial.

When to BRRRR and When Not to BRRRR

When you're wondering whether you should BRRRR a particular residential or commercial property or not, there are two concerns that we 'd recommend asking yourself ...

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


The first concern is essential since an effective BRRRR offer depends upon having found a good deal ... otherwise you might get in trouble when you try to refinance.

And the 2nd concern is crucial because 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 discover more about the BRRRR method?

Here are some of our preferred 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 All Of It 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 fantastic method to purchase realty. It allows you to do so without using your own money and, more significantly, it enables you to recover your capital so that you can reinvest it into brand-new units.