BRRRR Strategy in Real Estate

Buy: The core idea is to find undervalued properties with good potential. These are often distressed properties in need of repairs or located in up-and-coming areas. The goal is to buy them below market value.

Renovate: This is where you upgrade the property to increase its value. Renovations can range from cosmetic fixes (paint, flooring) to major structural or system overhauls. The key is to be strategic – aim for upgrades that will appeal to renters and significantly boost the property’s worth.

Rent: Once the property is updated, find a reliable tenant (or tenants) to bring in rental income. This income stream creates cash flow and demonstrates the property’s profitability to lenders.

Refinance: This is the crux of the BRRRR method. After some time (usually 6-12 months for seasoning requirements), you refinance the loan on the property. Because you’ve renovated it, the appraised value should be much higher. You’ll likely do a cash-out refinance, getting a new loan for more than you owe, and taking the difference as cash in your pocket.

Repeat: It’s called “repeat” for a reason! You take that cash from the refinance, and it becomes your down payment on the next investment property. Then, you go through the BRRRR process all over again.

Why is BRRRR appealing?

Limited Cash Investment: The cash-out refinance step lets you recoup much of your initial investment. This enables you to buy more properties faster than if you saved for a full down payment each time.
Portfolio Growth: You’re continually acquiring new properties and turning them into income-generating assets.
Forced Appreciation: You create increased value instantly through renovations, rather than simply hoping the market appreciates over time.

Important Notes:

BRRRR takes work – Finding the right deals, renovations, and dealing with tenants is not passive income.
It relies on accurate appraisals after renovation – If appraisers don’t agree with your assessment of the increased value, the refinancing won’t go as planned.