By LocateMyWealth · Published · Last updated
What is the BRRRR Strategy?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It's a real estate investment strategy that allows you to build a portfolio of rental properties while recycling your initial capital.
The beauty of BRRRR is that, when executed correctly, you can potentially get all (or most) of your initial investment back through the refinance step, then use that same capital to purchase your next property.
The Five Steps Explained
1. Buy
Find a property below market value. This typically means:
- Distressed properties
- Foreclosures
- Properties with deferred maintenance
- Motivated sellers
Key Metric: Your all-in cost (purchase price + rehab) should be 70-75% of the After Repair Value (ARV).
2. Rehab
Renovate the property to increase its value. Focus on improvements that:
- Increase rental income
- Reduce future maintenance
- Add to the property's appraised value
Pro Tip: Create a detailed scope of work before starting. Unexpected costs kill BRRRR deals.
3. Rent
Find quality tenants at market rent. A well-rehabbed property in good condition will attract better tenants who:
- Pay on time
- Take care of the property
- Stay longer
4. Refinance
After the property is stabilized (typically 6-12 months), refinance with a conventional mortgage. Most lenders will loan 70-75% of the appraised value.
If your numbers work, this refinance should return most or all of your initial capital.
5. Repeat
Take the capital from your refinance and start the process again with a new property.
The Math Behind BRRRR
Here's a real example of how BRRRR numbers work:
| Item | Amount |
|---|---|
| Purchase Price | $80,000 |
| Rehab Cost | $30,000 |
| All-In Cost | $110,000 |
| After Repair Value (ARV) | $150,000 |
| Refinance at 75% LTV | $112,500 |
| Capital Returned | $2,500 profit |
Common Mistakes to Avoid
- Underestimating rehab costs - Always add 15-20% contingency
- Overestimating ARV - Be conservative with comps
- Ignoring holding costs - Factor in taxes, insurance, utilities during rehab
- Rushing the refinance - Some lenders require seasoning periods
Tools for BRRRR Analysis
Use our BRRRR Analysis Sheet to run the numbers on potential deals. It includes:
- Purchase price analysis
- Rehab budget calculator
- Cash flow projections
- Refinance scenarios
Conclusion
The BRRRR strategy is powerful but requires careful analysis and execution. Start with one property, learn the process, and scale from there.
Frequently Asked Questions
What does BRRRR stand for in real estate?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It's a real estate investing strategy where you purchase undervalued properties, renovate them, rent them out, refinance to pull out your capital, and repeat the process with another property.
How much money do I need to start BRRRR investing?
Most BRRRR investors start with $30,000-$50,000 for their first deal, covering down payment (typically 20-25% for investment properties), rehab costs, and reserves. Some investors use hard money loans or private money to reduce initial capital needed.
What is a good BRRRR deal?
A good BRRRR deal typically has an all-in cost (purchase + rehab) of 70-75% of the After Repair Value (ARV). This allows you to refinance at 75-80% LTV and recover most or all of your initial investment while maintaining positive cash flow.
How long does a typical BRRRR deal take?
A typical BRRRR deal takes 6-12 months from purchase to refinance. This includes 1-3 months for rehab, 1-2 months to find tenants, and waiting for any lender seasoning requirements (typically 6-12 months) before refinancing.