Understanding The BRRRR Method for Real Estate Investment

Posted: May 21, 2025 Written by Jennifer Slowik

Investing in rental real estate isn’t just about purchasing a property and collecting rent, it’s a strategy-driven process that requires insight, planning, and a willingness to put in some work. One popular approach that combines all these elements is the BRRRR method, designed specifically for investors interested in buying, renovating, and leveraging properties to scale their portfolios.

“Opportunities don't just happen. You create them.” - Chris Grosser

Here is everything you need to know about the BRRRR Method 🏠

What is the BRRRR Method?

 The BRRRR strategy stands for Buy, Rehab, Rent, Refinance, Repeat. It’s a repeatable cycle that allows investors to turn rundown or undervalued homes into rental income properties and then use the equity they’ve built to acquire additional properties.

Here’s how it works:

1. Buy a property below market value—ideally one that needs repairs.

2. Rehab the home by fixing structural and cosmetic issues to boost value and livability.

3. Rent the property to tenants, generating monthly income.

4. Refinance the loan to extract equity gained through appreciation and improvements.

5. Repeat the process by investing the refinanced funds into another property.

The idea is to increase property value through smart renovations, generate cash flow from renting, and then reinvest the profits—without needing to sell the asset.

Breaking Down the BRRRR Process

1. Buy

Success with BRRRR starts with acquiring the right property. Investors typically target homes priced below market value—often in need of repairs. Short-term financing options like hard money or fix-and-flip loans are common tools for getting these deals off the ground quickly.

Key buying metrics include:

• After-Repair Value (ARV): What the home will be worth post-renovation.

• Maximum Allowable Offer (MAO): The highest price you can pay while still turning a profit.

• 70% Rule: Many investors aim to pay no more than 70% of the ARV, leaving a margin for renovation costs and profit.

For instance, a home with an ARV of $400,000 would typically have a maximum purchase price of $280,000 under this rule.

2. Rehab

Once the deal closes, renovations begin. This phase focuses on making the property safe, functional, and attractive to renters. This could involve structural repairs, aesthetic upgrades, or even full system overhauls like plumbing or electrical.

Renovation funding often comes from cash reserves, loans, or doing some of the work yourself to cut costs.

3. Rent

With the property rehabbed, the next goal is to place a reliable tenant. Steady rental income not only covers mortgage and maintenance costs, but it also strengthens your case when you seek refinancing.

Lenders often prefer properties with proven rental performance, as it reduces their risk.

4. Refinance

Refinancing allows you to pull out the equity you’ve created through renovation and appreciation. A cash-out refinance replaces your original short-term loan with a traditional mortgage and gives you a lump sum to reinvest.

Lenders typically require:

• A seasoning period (often 6+ months)

• At least 25% equity in the property

• Solid credit (usually 620+)

• Cash reserves

• Acceptable debt-to-income (DTI) ratio, ideally under 36–50%

Refinancing may reset your loan term, so it’s important to weigh the long-term financial impact.

5. Repeat

With cash in hand from the refinance, you can search for your next investment property and repeat the cycle. Over time, this creates a self-sustaining system for growing a real estate portfolio—without needing to sell off properties or rely solely on personal savings.

BRRRR in Practice: An Example

Let’s say you purchase a fixer-upper for $240,000 using a hard money loan. The ARV is projected at $360,000. You budget $30,000 for renovations.

• After repairs, the property is appraised at $360,000.

• You rent it for $1,600/month, covering mortgage costs.

• A few months later, you refinance, pulling out $80,000 in equity.

• You then use that equity as a down payment on your next BRRRR property.

The process can be repeated as long as you continue to identify good deals and maintain solid financial standing.

Pros and Cons of the BRRRR Method

Advantages

• Leverages equity from one property to fund another, accelerating portfolio growth

• Creates recurring rental income

• Often cheaper to buy distressed homes, making entry easier for new investors

Challenges

• High upfront costs for purchase and renovations

• Market fluctuations can delay appreciation or limit refinancing options

• May be difficult to find both suitable properties and reliable tenants

In Summary

The BRRRR method offers a powerful framework for building long-term wealth through real estate. While it requires significant due diligence and some risk tolerance, the rewards can be substantial for those who execute it well.