The BRRRR method, coined by real estate investor and author Brandon Turner, stands for Buy, Rehab, Rent, Refinance, and Repeat. This strategy has become popular among real estate investors because it offers a way to build a scalable and profitable rental portfolio with minimal, or zero upfront capital. By leveraging forced appreciation (the value added through property rehabs), investors can extract equity, refinance their properties, and use the proceeds to reinvest in additional properties..
At the core of the BRRRR strategy is the concept of the After Repair Value (ARV). By accurately calculating the ARV, investors can predict how much a property will be worth after renovations, which is critical for determining the refinance amount and ensuring the process is profitable. Below, we'll dive deeper into how each step of the BRRRR method works and why it has become a game-changer for real estate investors.
The first step in the BRRRR method is buying a distressed or undervalued property. The key to success in this phase is purchasing at a price that allows for profitable rehabbing and refinancing. Investors typically look for properties that need work but have strong potential for appreciation once repairs are completed. To do this, they often rely on accurate comps (comparable property sales) to estimate the fair market value and the ARV after repairs.
Many BRRRR investors, including Brandon Turner, emphasize the importance of buying below market value. This gives you a better margin for profit after repairs are done. One of the best sources for finding these properties is off-market deals, such as foreclosures, distressed homes, or properties owned by motivated sellers. With a strong ARV estimate, investors can ensure they’re getting a deal that will yield returns once the process moves forward.
Once you’ve secured a property, the next step is the rehab phase. During this stage, investors focus on making renovations that will increase the property's value. This could include anything from cosmetic updates, like painting and flooring, to more extensive repairs, such as updating electrical systems or fixing structural issues. The goal is to ensure the property’s condition aligns with comparable homes in the area, bringing it up to or above market standards.
Proponents of the BRRRR method stress that it's crucial to keep renovation costs under control. Over-renovating can eat into profits and make it harder to achieve a successful refinance. Investors should work closely with contractors to create a rehab budget and stick to it, always keeping the ARV in mind as they make decisions about which repairs are essential.
After the property has been rehabbed and is in rentable condition, the next step is to find tenants and start generating cash flow. This phase is critical because having a steady rental income stream proves the property’s profitability to lenders, which will be important during the refinancing process.
Before renting, investors should assess the local rental market to determine how much rent they can reasonably charge. Setting the rent price is a balance between maximizing cash flow and ensuring the property remains competitive in the market. A property that is rented quickly and reliably will increase the likelihood of a smooth refinancing process.
Once the property is rented and generating income, the investor can move on to the refinance phase. Here, the investor takes the property’s ARV into account when applying for a cash-out refinance. Essentially, the lender will appraise the property based on its current, improved condition, and the investor can then borrow against the new value.
A quick and clean refinance is the key to the BRRRR strategy's scalability. By refinancing, investors can recoup the capital they initially used to purchase and rehab the property. These funds can then be used to buy the next property, repeating the process and expanding the investor's rental portfolio without needing to save for new down payments each time. The BRRRR method allows for consistent reinvestment, providing a roadmap for building wealth through real estate.
The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat), is a powerful real estate investment strategy that enables investors to scale their rental portfolios efficiently. By focusing on distressed properties, calculating ARV, and leveraging cash-out refinances, investors can continue reinvesting capital into new properties. This repeatable process offers a proven way to maximize returns while minimizing the need for new upfront capital injections. The key to success lies in careful property selection, disciplined rehabbing, and strategic refinancing to fuel ongoing growth.
