The BRRRR Method for Beginners: How to Build Wealth Through Real Estate, One Property at a Time
— The BRRRR method helps real estate investors build passive income by recycling their initial investment across multiple rental properties.
The BRRRR Strategy is a commonly used real estate investing strategy that stands for; Buy, Rehab, Rent, Refinance, Repeat.
It’s designed to help investors build a rental property portfolio quickly by reusing the same initial cash investment across multiple deals.
Here's how it works:
- Buy a property below market value— either distressed or undervalued.
- Rehab the property to make it attractive to renters and to boost its value.
- Rent it out to generate stable monthly income.
- Refinance the property to pull out your initial cash (based on the new, higher value).
- Repeat the process with another property using the same funds.
The BRRRR method is popular because it allows you to scale your rental property portfolio without tying up large amounts of capital in each property.
Step 1: Buy
Find a Great Deal Below Market Value
The first and most important step in BRRRR is buying the right property. Your profit is often made at the purchase, so getting this part right sets the foundation for everything else.
What to Look For:
- Distressed properties that need a small amount of work
- Undervalued properties in up-and-coming neighborhoods
- Properties where after-repair value (ARV) is significantly higher than the purchase price + rehab cost
Where to Find Good BRRRR Deals:
- MLS
- Off-market leads
- Wholesalers
- Foreclosures or auctions
- Facebook groups or local investor meetups
How to Analyze the Deal:
Before buying, make sure you crunch the numbers so you know the deal will work:
- Purchase price
- Estimated rehab cost
- Estimated ARV
- Rent potential (check Rentometer, Zillow, or local comps)
- Holding costs (loan interest, taxes, insurance during rehab)
Tip: Use a BRRRR calculator or spreadsheet to make sure the numbers make sense.
How to Finance the Deal:
If the buyer doesn't have sufficient cash to complete the deal, financing can be obtained through a hard money lender.
In this scenario the buyer will usually need to put down a minimum of 25-30% of the purchase price while the hard money lender will cover the remaining balance.
It’s important to note, bridge loan interest rates range from 9-12% depending on the lender and risks associated to the deal.
Bridge loans should only be used in short durations, i.e less 24 months or less, until long term financing can be secured.
For more information you can check out this full bridge loan guide.
Step 2: Rehab
Once you’ve bought the property, the next step is to rehab it. The goal here isn’t to make the home luxurious; it’s to make it clean, safe, livable, and attractive enough to rent quickly.
You also will need to increase the property’s value for your refinance.
Focus on Value Add Improvements:
Stick to upgrades that increase the home’s appeal and market value without going over budget. The highest value return on investment improvements are:
- Fresh coat of paint (inside and out)
- New flooring
- Updated kitchen and bathrooms
- Fixing plumbing or electrical issues
- Roof or HVAC repairs
- Curb appeal: yard cleanup, new door, mailbox, etc.
By focusing on the right improvements, you’ll not only attract quality tenants but also position the property for a higher appraisal setting yourself up for a successful refinance later on.
Step 3: Rent
Secure Tenants and Lock In Recurring Monthly Cash Flow
After you've renovated the property, it's time to put it to work. Getting a solid tenant in place quickly is a critical step not just for generating income, but also for positioning your property for a successful refinance (which we’ll cover in Step 4).
The goal here is to stabilize the property by renting it out to someone who will pay consistently, take care of the space, and stick around long term.
How to Set the Right Rent Price:
Start by researching your local rental market:
- Use tools like Zillow, Rentometer, or Craigslist to compare similar properties.
- Look at location, square footage, number of bedrooms/bathrooms, and amenities.
- Factor in your expenses: mortgage, taxes, insurance, and maintenance. The rent needs to cover your costs and provide a buffer for profit.
Tip: It’s better to rent slightly below market and get a great tenant quickly than to overprice and let the unit sit empty.
Step 4: Refinance
After you have renovated and rented out the property, the next step of the BRRRR method is to refinance the property.
By using a cash-out refinance the investor will replace the existing hard money loan with a conventional 25 or 30 year mortgage.
This new loan amount will be based on the new higher value of the property after the rehab, not the original purchase price.
When executed correctly the investor will now own a cash flowing investment property while simultaneously recouping their initial capital investment, allowing the investor to repeat the process.
Step 5: Repeat
The final stage of the BRRRR method is to repeat the process.
Repeating this strategy over and over again enables investors to scale their portfolio by acquiring multiple rental properties.
This is a fantastic wealth building tool and should be considered by real estate investors looking to grow their passive income rental portfolios.
Many investors have found financial freedom using the BRRRR method without tying up large amounts of capital.
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