What if you could grow your property portfolio by taking the cash (frequently, somebody else's cash) you used to acquire 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 approach.

It allows investors to buy more than one residential or commercial property with the very same funds (whereas standard investing needs fresh cash at every closing, and thus takes longer to get residential or commercial properties).

So how does the BRRRR approach 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, rent, re-finance, and repeat. The BRRRR method is gaining appeal due to the fact that it allows financiers to use the same funds to acquire multiple residential or commercial properties and hence grow their portfolio faster than traditional realty financial investment approaches.

To start, the investor finds a great offer 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 very important for the refinancing stage.

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

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

Finally, the financier does what's called a cash-out refinance on the residential or commercial property. This is when a banks offers a loan on a residential or commercial property that the financier currently owns and returns the money that they utilized to acquire the residential or commercial property in the very first place.

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

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

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

An Example of the BRRRR Method

To understand how the BRRRR procedure works, it might be valuable 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, marketing while the residential or commercial property is uninhabited) will be about $5,000.

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

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

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

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

Note: This is just one example. It's possible, for instance, that you could get the residential or commercial property for less than 75% of ARV and end up taking home money from the cash-out re-finance. It's also possible that you might pay for all buying and rehab costs out of your own pocket and after that recoup that cash at the cash-out re-finance (instead of using personal money or difficult 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 approach one action at a time. We'll discuss how you can discover bargains, safe funds, compute rehab expenses, bring in quality tenants, do a cash-out re-finance, and repeat the entire procedure.

The primary step is to discover bargains and acquire them either with money, private cash, or difficult money.

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

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


We also advise going through our 14 Day 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 do not want to purchase for more than 75% of the residential or commercial property's ARV. And ideally, you want to buy for less than that (this will result in money after the cash-out refinance).

If you wish to find personal money to acquire the residential or commercial property, then try ...

- Connecting to pals and household members
- Making the lending institution an equity partner to sweeten the deal
- Networking with other service owners and financiers on social networks


If you wish to find difficult money to purchase the residential or commercial property, then try ...

- Searching for difficult cash lenders in Google
- Asking a real estate agent who deals with investors
- Requesting recommendations to difficult money loan providers from local title business


Finally, here's a fast breakdown of how REISift can help you find and protect 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 investing as little cash as possible. You absolutely do not wish to spend too much on fixing the home, paying for extra home appliances and updates that the home doesn't require in order to be marketable.

That does not suggest you ought to cut corners, though. Ensure you employ credible contractors and fix everything that requires to be fixed.

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

When buying the residential or commercial property, it's best to estimate your repair costs a bit higher than you expect - there are usually unforeseen repair work that turn up throughout the rehabilitation stage.

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

Obviously, you wish to do this as rapidly as possible so you can refinance the home and move onto purchasing other residential or commercial properties ... but don't hurry it.

Remember: the priority is to discover great tenants.

We recommend using the 5 following criteria when thinking about 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 reject an occupant since they don't fit the above requirements and lose a couple of months of cash-flow than it is to let a bad tenant in the home who's going to cause you issues down the road.

Here's a video from Dude Real Estate that uses some great suggestions for discovering top quality renters.

Now it's time to do a cash-out refinance on the residential or commercial property. This will enable you to pay off your tough money loan provider (if you used one) and recoup your own expenses so that you can reinvest it into an extra residential or commercial property.

This is where the rubber meets the roadway - if you found a great deal, rehabbed it effectively, and filled it with top quality occupants, then the cash-out refinance need to go efficiently.

Here are the 10 finest cash-out refinance loan providers of 2021 according to Nerdwallet.

You might likewise discover a regional bank that wants to do a cash-out refinance. But keep in mind that they'll likely be a seasoning duration of at least 12 months before the lending institution is ready to offer you the loan - ideally, by the time you're finished with repairs and have found occupants, this flavoring period will be completed.

Now you repeat the procedure!
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If you used a personal money loan provider, they might be prepared to do another handle you. Or you might use another hard money lender. Or you might reinvest your money into a new residential or commercial property.

For as long as everything goes smoothly with the BRRRR method, you'll have the ability to keep acquiring residential or commercial properties without truly utilizing your own cash.

Here are some advantages and disadvantages of the investing approach.

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

Scalable - Because BRRRR permits you to reinvest the exact same funds into new units after each cash-out refinance, the model is scalable and you can grow your portfolio extremely rapidly.

Growing Equity - With every residential or commercial property you acquire, 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 lending institution 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 rapidly as possible, but you'll typically be paying the tough cash lenders for a minimum of a year or so.

Seasoning Period - Most banks need a "spices duration" 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 sometimes closer to two years.

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

Appraisal Risk - Before you buy the residential or commercial property, you'll wish to ensure that your ARV estimations 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 great deal is so darn crucial.

When to BRRRR and When Not to BRRRR

When you're wondering whether you need to BRRRR a specific residential or commercial property or not, there are 2 questions that we 'd suggest 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 because a successful BRRRR offer depends upon having actually discovered a good deal ... otherwise you might get in problem when you try to refinance.

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

Want to find out more about the BRRRR technique?

Here are some of our favorite books on the topics ...
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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 How Much All Of It Costs by J Scott
How to Purchase Real Estate: The Ultimate Beginner's Guide to Starting by Brandon Turner
Final Thoughts on the BRRRR Method

The BRRRR technique is a terrific way to purchase genuine estate. It enables you to do so without using your own money and, more notably, it permits you to recover your capital so that you can reinvest it into new systems.