What if you could grow your property portfolio by taking the money (typically, somebody else's money) you utilized to buy 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 realty investing method.

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

So how does the BRRRR method work? What are its advantages and disadvantages? How do you do it? And what things should you think about before BRRRR-ing a residential or commercial property?

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

BRRRR means buy, rehabilitation, rent, re-finance, and repeat. The BRRRR method is gaining popularity due to the fact that it enables investors to utilize the very same funds to acquire several residential or commercial properties and therefore grow their portfolio more rapidly than conventional real estate investment approaches.

To begin, the genuine estate investor finds a great offer and pays a max of 75% of its ARV in cash for the residential or commercial property. Most lending institutions will just loan 75% of the ARV of the residential or commercial property, so this is essential for the refinancing stage.

( You can either use money, hard cash, or personal money to acquire the residential or commercial property)

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

Finally, the financier does what's called a cash-out refinance on the residential or commercial property. This is when a financial organization offers a loan on a residential or commercial property that the financier already owns and returns the money 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 is able to pay for this new mortgage, take the cash from the cash-out re-finance, and reinvest it into brand-new units.

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

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

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 discover a residential or commercial property with an ARV of $200,000.

You prepare for that repair work expenses will be about $30,000 and holding costs (taxes, insurance, marketing while the residential or commercial property is vacant) will be about $5,000.

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

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

You offer the sellers $115,000 (limit deal) and they accept. You then find a difficult money loan provider 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 refinance and the brand-new loan provider concurs to loan you $150,000 (75% of the residential or commercial property's worth). You pay off the tough cash loan provider and get your down payment of $30,000 back, which permits you to repeat the process on a new residential or commercial property.

Note: This is simply one example. It's possible, for circumstances, that you might acquire the residential or commercial property for less than 75% of ARV and end up taking home additional money from the cash-out re-finance. It's likewise possible that you might pay for all getting and rehabilitation expenses out of your own pocket and then recoup that cash at the cash-out re-finance (rather than utilizing private cash or hard money).

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 technique one action at a time. We'll describe how you can discover bargains, protected funds, determine rehab costs, draw in quality occupants, do a cash-out re-finance, and repeat the entire process.

The primary step is to find bargains and purchase them either with money, cash, or hard cash.

Here are a few guides we have actually created to assist you with finding high-quality offers ...

How to Find Real Estate 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 produces leads using REISift.

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

If you wish to discover personal cash to buy the residential or commercial property, then try ...

- Reaching out to family and friends members
- Making the lending institution an equity partner to sweeten the offer
- Connecting with other company owners and investors on social networks


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

- Searching for hard cash lending institutions in Google
- Asking a property agent who deals with investors
- Requesting referrals to hard cash lenders from local title companies


Finally, here's a quick breakdown of how REISift can help you discover and secure more deals from your existing data ...

The next action is to rehab the residential or commercial property.

Your goal is to get the residential or commercial property to its ARV by spending as little money as possible. You definitely don't wish to spend too much on fixing the home, paying for extra appliances and updates that the home doesn't need in order to be marketable.

That does not indicate you must cut corners, though. Make certain you hire reliable professionals and repair whatever that needs to be fixed.

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

When buying the residential or commercial property, it's best to approximate your repair work costs a bit higher than you anticipate - there are almost constantly unexpected repair work that turn 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 quickly as possible so you can re-finance the home and move onto buying other residential or commercial properties ... however do not rush it.

Remember: the top priority is to discover good renters.

We recommend using the 5 following requirements when thinking about 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 turn down a tenant due to the fact that they do not fit the above criteria and lose a few months of cash-flow than it is to let a bad renter in the home who's going to cause you issues down the road.

Here's a video from Dude Real Estate that uses some excellent guidance for discovering top quality occupants.

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

This is where the rubber meets the road - if you found a good deal, rehabbed it sufficiently, and filled it with premium tenants, then the cash-out refinance ought to go smoothly.

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

You might also find a local bank that wants to do a cash-out re-finance. But keep in mind that they'll likely be a spices period of a minimum of 12 months before the lending institution wants to provide you the loan - preferably, by the time you're finished with repair work and have discovered occupants, this spices period will be completed.

Now you repeat the procedure!

If you utilized a personal money loan provider, they may be ready to do another offer with you. Or you could utilize another hard money lending institution. Or you could reinvest your money into a new residential or commercial property.

For as long as everything goes efficiently with the BRRRR technique, you'll have the ability 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 requires really little (or no) out-of-pocket cash, so your returns need to be sky-high compared to conventional realty investments.

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

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

High-Interest Loans - If you're utilizing a hard-money lending institution to BRRRR residential or commercial properties, then you'll likely be paying a high rate of interest. The goal 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 two.

Seasoning Period - Most banks need a "flavoring period" before they do a cash-out refinance on a home, which shows that the residential or commercial property's cash-flow is stable. This is generally a minimum of 12 months and often closer to 2 years.
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Rehabbing - Rehabbing a residential or commercial property has its risks. You'll have to handle professionals, mold, asbestos, structural inadequacies, and other unanticipated problems. Rehabbing isn't for the light of heart.

Appraisal Risk - Before you purchase the residential or commercial property, you'll want 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 bargain is so darn important.

When to BRRRR and When Not to BRRRR

When you're questioning whether you should BRRRR a particular residential or commercial property or not, there are 2 concerns that we 'd recommend asking yourself ...

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


The very first question is very important because a successful BRRRR offer depends upon having actually discovered a great offer ... otherwise you might get in problem when you attempt to refinance.

And the second concern is important 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 find out more about the BRRRR technique?

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 Everything Costs by J Scott
How to Buy Real Estate: The Ultimate Beginner's Guide to Getting going by Brandon Turner
Final Thoughts on the BRRRR Method

The BRRRR method is an excellent method to purchase realty. It enables you to do so without utilizing your own money and, more notably, it permits you to recover your capital so that you can reinvest it into brand-new units.