What if you could grow your property portfolio by taking the money (frequently, somebody else's money) you used 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 property investing technique.
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It enables financiers to acquire more than one residential or commercial property with the same funds (whereas conventional investing requires fresh cash at every closing, and hence takes longer to obtain residential or commercial properties).

So how does the BRRRR method work? What are its benefits and drawbacks? 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 technique is getting popularity due to the fact that it allows investors to utilize the very same funds to buy multiple residential or commercial properties and therefore grow their portfolio more rapidly than standard real estate financial investment methods.

To begin, the investor discovers a bargain and pays a max of 75% of its ARV in money for the residential or commercial property. Most loan providers will only loan 75% of the ARV of the residential or commercial property, so this is very important for the refinancing stage.

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

Then the investor rehabs the residential or commercial property and rents it out to renters to develop constant cash-flow.

Finally, the investor does what's called a cash-out re-finance on the residential or commercial property. This is when a monetary institution offers a loan on a residential or commercial property that the financier already owns and returns the cash that they used to buy the residential or commercial property in the very first location.

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

Theoretically, the BRRRR process can continue for as long as the investor continues to purchase wise and keep residential or commercial properties inhabited.

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

An Example of the BRRRR Method

To understand how the BRRRR process works, it may be handy 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 work expenses will have to do with $30,000 and holding costs (taxes, insurance, marketing while the residential or commercial property is uninhabited) will have to do with $5,000.

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

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

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

Next, you do a cash-out refinance and the brand-new lending institution consents to loan you $150,000 (75% of the residential or commercial property's worth). You settle the hard cash lender and get your down payment of $30,000 back, which enables you to duplicate the procedure on a brand-new residential or commercial property.

Note: This is simply one example. It's possible, for example, that you might get the residential or commercial property for less than 75% of ARV and end up taking home extra cash from the cash-out refinance. It's likewise possible that you might spend for all purchasing and rehab expenses out of your own pocket and then recoup that money at the cash-out re-finance (instead of using private money or hard cash).

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 technique one step at a time. We'll explain how you can find great offers, secure funds, compute rehab expenses, draw in quality occupants, do a cash-out refinance, and repeat the whole procedure.

The initial step is to find excellent offers and purchase them either with cash, personal money, or hard money.

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

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


We also suggest going through our 2 week Auto Lead Gen Challenge - it just costs $99 and you'll find out how to produce a system that generates leads using REISift.

Ultimately, you don't wish to purchase for more than 75% of the residential or commercial property's ARV. And ideally, you want to purchase for less than that (this will lead to additional cash after the cash-out refinance).

If you wish to find private cash to acquire the residential or commercial property, then attempt ...

- Reaching out to friends and household members
- Making the lending institution an equity partner to sweeten the deal
- Networking with other service owners and financiers on social media


If you wish to discover tough money to purchase the residential or commercial property, then try ...

- Searching for tough cash loan providers in Google
- Asking a property agent who deals with investors
- Requesting referrals to difficult cash lenders from regional title business


Finally, here's a fast breakdown of how REISift can help you discover and protect more offers from your existing information ...

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 investing as little cash as possible. You definitely don't wish to spend beyond your means on repairing the home, paying for additional appliances and updates that the home doesn't need in order to be valuable.

That doesn't mean you should cut corners, though. Make certain you work with credible professionals and fix whatever that needs 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 estimate your repair costs a bit higher than you expect - there are generally unexpected repair work that come up throughout the rehab phase.

Once the residential or commercial property is completely rehabbed, it's time to find renters 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 ... but do not hurry it.

Remember: the top priority is to discover great tenants.

We recommend 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 better to decline 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 tenant in the home who's going to trigger you problems down the roadway.

Here's a video from Dude Real Estate that provides some terrific suggestions for discovering premium renters.

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

This is where the rubber fulfills the roadway - if you found a great deal, rehabbed it effectively, and filled it with premium occupants, then the cash-out re-finance need to go smoothly.

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

You may also find a regional bank that wants to do a cash-out refinance. But remember that they'll likely be a seasoning duration of at least 12 months before the loan provider is ready to provide you the loan - ideally, by the time you're done with repairs and have actually discovered renters, this spices duration will be ended up.

Now you repeat the process!

If you utilized a private cash loan provider, they may be happy to do another handle you. Or you might utilize another tough money lending institution. Or you could reinvest your money into a new residential or commercial property.

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

Here are some pros and cons of the BRRRR realty investing technique.

High Returns - BRRRR needs really little (or no) out-of-pocket money, so your returns must be sky-high compared to conventional real estate financial investments.

Scalable - Because BRRRR allows you to reinvest the 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 appreciation 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 interest rate. The objective is to rehab, rent, and refinance as rapidly as possible, but you'll typically be paying the difficult cash lenders for a minimum of a year or so.

Seasoning Period - Most banks require a "seasoning duration" before they do a cash-out refinance on a home, which indicates that the residential or commercial property's cash-flow is steady. This is typically a minimum of 12 months and often closer to two years.

Rehabbing - Rehabbing a residential or commercial property has its risks. You'll need to deal with professionals, mold, asbestos, structural insufficiencies, and other unforeseen issues. Rehabbing isn't for the light of heart.

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

When to BRRRR and When Not to BRRRR

When you're questioning whether you ought to BRRRR a particular residential or commercial property or not, there are two questions that we 'd advise asking yourself ...

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


The first concern is very important since a successful BRRRR deal hinges on having actually found an excellent deal ... otherwise you could get in trouble when you attempt to refinance.

And the second question is very important due to the fact that rehabbing a residential or commercial property is no little task. If you're not up to rehab the home, then you may think about wholesaling instead - here's our guide to wholesaling.

Want to learn more about the BRRRR technique?

Here are some of our favorite books on the subjects ...
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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 technique is a terrific way to purchase real estate. It enables you to do so without utilizing your own money and, more notably, it allows you to recoup your so that you can reinvest it into new units.