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

That's the premise of the BRRRR genuine estate investing approach.
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It allows financiers to purchase more than one residential or commercial property with the exact same funds (whereas conventional investing requires fresh money at every closing, and thus takes longer to acquire 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 consider before BRRRR-ing a residential or commercial property?

That's what we'll cover in this guide.

BRRRR means buy, rehabilitation, lease, re-finance, and repeat. The BRRRR approach is acquiring popularity because it permits financiers to use the exact same funds to purchase several residential or commercial properties and thus grow their portfolio faster than conventional realty financial investment techniques.

To begin, the investor finds a good offer 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 use money, tough money, or private money to purchase the residential or commercial property)

Then the investor rehabs the residential or commercial property and leas it out to renters to produce consistent 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 already owns and returns the cash that they used to purchase the residential or commercial property in the very first location.

Since the residential or commercial property is cash-flowing, the investor has the ability to spend for this brand-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 investor continues to buy clever and keep residential or commercial properties inhabited.

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

An Example of the BRRRR Method

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

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

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

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

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

You use 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 give them a deposit (your own money) of $30,000.

Next, you do a cash-out re-finance and the brand-new lending institution consents to loan you $150,000 (75% of the residential or commercial property's worth). You pay off the hard cash loan provider and get your down payment of $30,000 back, which enables 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 could obtain the residential or commercial property for less than 75% of ARV and wind up taking home extra cash from the cash-out re-finance. It's likewise possible that you might pay for all buying and rehabilitation expenses out of your own pocket and after that recoup that cash at the cash-out re-finance (rather than using personal money or difficult 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 describe how you can find bargains, safe and secure funds, calculate rehab expenses, attract quality tenants, do a cash-out refinance, and repeat the entire process.

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

Here are a couple of guides we've produced to assist 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 14 Day Auto Lead Gen Challenge - it just costs $99 and you'll find out how to develop a system that produces leads using REISift.

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

If you wish to discover private cash to acquire the residential or commercial property, then try ...

- Connecting to pals and family members
- Making the loan provider an equity partner to sweeten the offer
- Connecting with other company owner and investors on social networks


If you wish to find hard cash to buy the residential or commercial property, then attempt ...

- Searching for difficult cash loan providers in Google
- Asking a property representative who deals with financiers
- Requesting for referrals to difficult money loan providers from regional title companies


Finally, here's a fast breakdown of how REISift can assist you discover and protect 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 spending as little cash as possible. You definitely don't wish to spend too much on repairing the home, spending for extra appliances and updates that the home doesn't require in order to be marketable.

That doesn't imply you must cut corners, however. Make sure you employ credible contractors and fix everything that requires to be fixed.

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

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

Once the residential or commercial property is completely rehabbed, it's time to discover tenants 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 do not rush it.

Remember: the priority is to discover excellent tenants.

We suggest using 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 much better to reject an occupant due to the fact that they don't fit the above requirements and lose a few months of cash-flow than it is to let a bad renter in the home who's going to trigger you issues down the roadway.

Here's a video from Dude Real Estate that offers some fantastic advice for finding high-quality occupants.

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

This is where the rubber satisfies the roadway - if you found a bargain, rehabbed it effectively, and filled it with top quality tenants, then the cash-out re-finance need to go efficiently.

Here are the 10 best cash-out refinance loan providers of 2021 according to Nerdwallet.

You might also discover a local bank that's prepared to do a cash-out refinance. But remember that they'll likely be a flavoring duration of at least 12 months before the loan provider is ready to offer you the loan - preferably, by the time you're finished with repairs and have actually discovered occupants, this seasoning duration will be finished.

Now you repeat the procedure!

If you utilized a private money lender, they might be ready to do another deal with you. Or you might utilize another difficult money lender. Or you might reinvest your money into a brand-new residential or commercial property.

For as long as whatever goes efficiently with the BRRRR approach, you'll have the ability to keep buying residential or commercial properties without really using your own money.

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

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

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

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

High-Interest Loans - If you're a hard-money loan provider to BRRRR residential or commercial properties, then you'll likely be paying a high rates of interest. The objective is to rehab, lease, and re-finance as quickly as possible, but you'll typically be paying the hard money loan providers for at least a year or so.

Seasoning Period - Most banks need 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 normally at least 12 months and often closer to 2 years.

Rehabbing - Rehabbing a residential or commercial property has its dangers. You'll need to handle contractors, mold, asbestos, structural insufficiencies, and other unanticipated issues. 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 calculations 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 good 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 2 questions that we 'd suggest asking yourself ...

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


The very first concern is essential due to the fact that a successful BRRRR deal depends upon having found a good deal ... otherwise you might get in trouble when you attempt to re-finance.

And the second concern is important since rehabbing a residential or commercial property is no little task. If you're not up to rehab the home, then you might think about wholesaling instead - here's our guide to wholesaling.

Want to discover more about the BRRRR approach?

Here are some 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 Just 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 great method to invest in realty. It permits you to do so without utilizing your own cash and, more importantly, it permits you to recoup your capital so that you can reinvest it into new units.