The BRRRR method stands for Buy, Renovate, Rent, Refinance, Repeat and is a strategy many real estate investors use to scale their portfolios and build massive wealth. If you do it right, the money you use to buy your first property will be returned to you during your cash-out refinance, and you can use it again on the next property. Meanwhile, your first property is cash-flowing, appreciating, and creating massive tax breaks for you.

The B stands for Buy, which is simply the purchase of real estate. This is most important, because you have to buy right, otherwise the rest of the strategy does not work. You need to make sure that the purchase price + rent costs + holding costs + closing costs and any other fees total 70% or less than the ARV, or After Repair Value. This is also sometimes called the Market Value and it represents the value that an appraiser will likely come up with during your cash out refinance. Since most lenders will lend 75-80% LTV (loan to value) on a cash-out refinance, ensuring your purchase and all costs are less than 70% of that number allows you to pay the fees on the refinance and put all the cash you spent back into your pocket (or the next property).

The first R is for Renovate or Rehab. Since you got an insane discount, the property likely needs work! You can do it yourself, hire contractors, or a combination of the two. Either way, it’s important that the renovations are done to the standard of the comparable properties. It is possible to overdo the renovation, meaning that your upgrades are too high or you’re doing things that the appraiser will not count toward the value. In this case, you will spend more than you need to and not get that cash back. If you underdo it, or make it less nice than other comparable properties, you risk a lower appraisal and then cannot cash out as much.

Once it’s renovated you can put a tenant in the property. So you Rent it. You can self-manage, or use a property manager. If you choose to self-manage, make sure you are vetting your tenants appropriately, and they are qualified to rent your particular property.

Finally, you’re going to Refinance. Since you probably used hard money or private money or some sort of money that you have for a short period of time, you need to pay off that loan and get a long term loan with a more favorable monthly payment. You can use traditional banks or credit unions, and these will likely have the lowest rates. Private money, on the other hand, may be more expensive (higher in fees), and the rate may not be as competitive, but they typically don’t care about your income and will not report the loan against your credit. This type of loan allows you to scale your portfolio beyond the bank limit of 10 loans.

And then the last R is simply for Repeat. Now that you got your money back and own a rented, cash-flowing property that is appreciating every month, put that money to work! And do it AGAIN! And again, and again and again!

A lot of people out there are making a lot of money using this technique. It’s a great way to build your portfolio, and I’d love to help you with it! Schedule a call with me to discuss how to get started and check out my investor course!