BRRRR Strategy: Buy, Rehab, Rent, Refinance, Repeat

What is the BRRRR Strategy?

The BRRRR strategy is a powerful real estate investment method that allows investors to build a portfolio with minimal cash while maximizing returns. This strategy involves five key steps that create a cycle for continuous property acquisition.

The Five Steps of BRRRR

1. Buy

Purchase a distressed property below market value. Look for properties that need cosmetic or moderate repairs but have good bones and are in desirable locations.

Key considerations:

• Property should be 20-30% below market value
• Focus on emerging or stable neighborhoods
• Ensure the property meets rental demand criteria
• Analyze comparable sales and rental rates

2. Rehab

Renovate the property to increase its value and make it rent-ready. Focus on improvements that provide the highest ROI.

Smart renovation tips:

• Prioritize curb appeal and interior aesthetics
• Update kitchens and bathrooms for maximum impact
• Ensure all systems (HVAC, plumbing, electrical) are functional
• Use quality materials but avoid over-improving for the area

3. Rent

Secure reliable tenants at market rates or above. Good cash flow is essential for the strategy's success.

Rental optimization:

• Screen tenants thoroughly
• Set competitive but profitable rent rates
• Consider property management if you plan to scale
• Maintain good relationships with quality tenants

4. Refinance

Once the property is renovated and rented, refinance based on the new appraised value to pull out most or all of your initial investment.

Refinancing best practices:

• Wait for at least 6 months of rental history
• Work with lenders familiar with investment properties
• Aim for 75-80% LTV on the new appraised value
• Keep some cash reserves for future deals

5. Repeat

Use the capital from refinancing to purchase the next property and repeat the cycle.

Benefits of BRRRR

• Capital Efficiency: Recycle the same capital multiple times
• Portfolio Growth: Build multiple properties without depleting cash reserves
• Cash Flow: Generate monthly passive income from rentals
• Appreciation: Benefit from property value increases over time
• Tax Benefits: Depreciation and expense deductions

Risks and Mitigation

Common risks:

• Over-renovation costs
• Refinance appraisal comes in low
• Tenant vacancy periods
• Market downturns affecting values

Mitigation strategies:

• Conservative renovation budgets with 10-20% contingency
• Build relationships with reliable contractors
• Maintain cash reserves for holding costs
• Diversify across different markets and property types

Success Metrics

A successful BRRRR deal should achieve:

• 75-100% of initial capital recovered through refinance
• Positive monthly cash flow of $200+ per property
• 15%+ cash-on-cash return on remaining invested capital
• Property appreciation potential in growing markets

Getting Started

1. Education: Study your local market and rental demand
2. Financing: Establish relationships with hard money lenders and banks
3. Team Building: Find reliable contractors, property managers, and agents
4. Deal Analysis: Use conservative numbers and multiple scenarios
5. Start Small: Begin with one property to learn the process

The BRRRR strategy is powerful but requires careful planning, market knowledge, and disciplined execution. Start with thorough education and conservative projections to build your real estate empire systematically.