What if you could grow your realty portfolio by taking the money (frequently, another person'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 premise of the BRRRR realty investing method.

It allows investors to purchase more than one residential or commercial property with the same funds (whereas traditional investing requires fresh money at every closing, and hence takes longer to get residential or commercial properties).

So how does the BRRRR approach work? What are its advantages and disadvantages? 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 represents buy, rehab, lease, refinance, and repeat. The BRRRR approach is gaining popularity because it allows investors to use the exact same funds to buy numerous residential or commercial properties and hence grow their portfolio quicker than conventional real estate investment techniques.

To start, the investor finds a good deal and pays a max of 75% of its ARV in cash for the residential or commercial property. Most loan providers will just loan 75% of the ARV of the residential or commercial property, so this is important for the refinancing stage.

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

Then the financier rehabs the residential or commercial property and leas it out to tenants to produce constant cash-flow.

Finally, the financier does what's called a cash-out re-finance on the residential or commercial property. This is when a banks offers 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 location.

Since the residential or commercial property is cash-flowing, the investor has the ability to spend for this brand-new mortgage, take the money from the cash-out refinance, and reinvest it into new systems.

Theoretically, the BRRRR procedure can continue for as long as the investor continues to buy smart and keep residential or commercial properties occupied.

Here's a video from Ryan Dossey explaining the BRRRR process for newbies.

An Example of the BRRRR Method

To comprehend how the BRRRR procedure works, it may be useful to walk through a quick example.

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

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

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

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

You provide the sellers $115,000 (limit offer) and they accept. You then discover a tough cash lending institution to loan you $150,000 ($ 35,000 + $115,000) and provide a down payment (your own money) of $30,000.

Next, you do a cash-out re-finance and the brand-new loan provider consents to loan you $150,000 (75% of the residential or commercial property's value). You pay off the tough money loan provider and get your deposit of $30,000 back, which permits you to repeat the procedure on a brand-new residential or commercial property.

Note: This is simply one example. It's possible, for example, that you might obtain the residential or commercial property for less than 75% of ARV and wind up taking home extra money from the cash-out re-finance. It's likewise possible that you could spend for all buying and rehabilitation costs out of your own pocket and after that recover that money at the cash-out refinance (instead of utilizing personal cash or difficult 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 approach one step at a time. We'll explain how you can find good deals, protected funds, compute rehab costs, bring in quality occupants, do a cash-out re-finance, and repeat the entire procedure.

The first step is to discover bargains and buy them either with money, personal money, or difficult cash.

Here are a couple of guides we have actually created to help you with finding premium offers ...

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


We also suggest going through our 14 Day Auto Lead Gen Challenge - it just costs $99 and you'll learn how to develop a system that generates leads utilizing REISift.

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

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

- Connecting to loved ones members
- Making the lending institution an equity partner to sweeten the deal
- Connecting with other company owner and financiers on social networks


If you wish to discover hard money to buy the residential or commercial property, then attempt ...

- Searching for hard money loan providers in Google
- Asking a property representative who works with financiers
- Requesting for recommendations to difficult cash loan providers from local title business


Finally, here's a quick breakdown of how REISift can help you find and secure 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 absolutely do not wish to spend beyond your means on repairing the home, spending for additional devices and updates that the home doesn't need in order to be valuable.

That does not indicate you ought to cut corners, however. Make certain you employ reliable specialists and repair whatever that needs to be fixed.

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

When purchasing the residential or commercial property, it's finest to approximate your repair work costs a bit higher than you anticipate - there are generally unexpected repair work that come up throughout the rehabilitation phase.

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

Obviously, you wish to do this as quickly as possible so you can refinance the home and move onto acquiring other residential or commercial properties ... however do not hurry it.

Remember: the top priority is to discover good occupants.

We advise utilizing the 5 following requirements when considering tenants for your residential or commercial properties ...
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1. Stable Employment
2. No Past Evictions
3. Good References
4. Sufficient Income
5. Good Financial History


It's much better to decline an occupant because they do not fit the above criteria and lose a couple of months of cash-flow than it is to let a bad occupant in the home who's going to cause you problems down the roadway.

Here's a video from Dude Real Estate that uses some fantastic suggestions for discovering high-quality tenants.

Now it's time to do a cash-out re-finance on the residential or commercial property. This will allow you to settle your hard money loan provider (if you utilized one) and recover your own expenses so that you can reinvest it into an extra residential or commercial property.

This is where the rubber meets the road - if you discovered a good deal, rehabbed it properly, and filled it with top quality tenants, then the cash-out re-finance should go efficiently.

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

You may likewise find a regional bank that's prepared to do a cash-out refinance. But bear in mind that they'll likely be a flavoring duration of at least 12 months before the lender is willing to provide you the loan - ideally, by the time you're finished with repairs and have found occupants, this spices period will be ended up.

Now you duplicate the procedure!

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

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

Here are some pros and cons of the BRRRR property investing method.

High Returns - BRRRR needs extremely little (or no) out-of-pocket money, so your returns should be sky-high compared to traditional property investments.

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

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 utilizing a hard-money lender to BRRRR residential or commercial properties, then you'll likely be paying a high interest rate. The goal is to rehab, rent, and re-finance as quickly as possible, but you'll normally be paying the difficult money lenders for at least a year or two.

Seasoning Period - Most banks require a "flavoring period" before they do a cash-out refinance on a home, which suggests that the residential or commercial property's cash-flow is stable. This is generally at least 12 months and sometimes closer to 2 years.

Rehabbing - Rehabbing a residential or commercial property has its dangers. You'll need to deal with specialists, mold, asbestos, structural inadequacies, and other unforeseen problems. Rehabbing isn't for the light of heart.

Appraisal Risk - Before you purchase the residential or commercial property, you'll wish to make certain that your ARV calculations are air-tight. There's constantly a danger of the appraisal not coming through like you had actually hoped when re-financing ... that's why getting a bargain is so darn important.

When to BRRRR and When Not to BRRRR

When you're questioning whether you must BRRRR a particular residential or commercial property or not, there are two questions that we 'd advise 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 due to the fact that an effective BRRRR offer depends upon having discovered a lot ... otherwise you might get in difficulty when you try to refinance.

And the 2nd question is essential because rehabbing a residential or commercial property is no small task. If you're not up to rehab the home, then you may consider wholesaling rather - here's our guide to wholesaling.

Want to find out more about the BRRRR approach?

Here are a few of our preferred books on the subjects ...
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Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Residential Or Commercial Property Investment 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 Invest in 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 enables you to do so without using your own money and, more significantly, it permits you to recover your capital so that you can reinvest it into brand-new units.