The BRRRR Method is an investment strategy that allows you to expand your real estate investment portfolio at a rapid pace. When executed correctly, it has the potential to deliver a tremendous return on your initial investment. Also known as the Buy, Rehab, Rent, Refinance, Repeat Method, this strategy involves fixing up a distressed property and then refinancing it without closing costs (often through a cash-out refinance), in order to withdraw the equity you’ve built.
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Step 1 & Step 2 - Buy & Rehab
Buy a dilapidated property at 70% or less of its market value. This is generally considered buying distressed properties. You will buy at a steep discount, then spend your money on fixing it up until you’ve got a nice property that you can rent out for a profit. It’s important to note that many investors are looking for these same types of deals, so don’t expect them to be easy to find. However, if you do find one, and complete step 2 and 3 successfully, you should be able to reap big rewards.
Step 3 - Rent
After you have purchased a property, you need to rehab it and rent it out. Always make sure that you have enough of a cushion (10%+) so that if your renter is late on their payments, you don’t end up in foreclosure. For example, if your rent is $1,000 per month and your expenses are $700 per month plus utilities, make sure your tenant pays at least $1,300.
Step 4 - Refinance
Once you’ve purchased a property, take out a loan using it as collateral. The new loan will typically be larger than your previous mortgage, giving you cash with which to buy more properties. If you use your own money for down payments and closing costs rather than leveraging debt, congratulations! You’re doing it right.
Step 5 - Repeat
Now that you have most of your money back you can do it all again
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