Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

The BRRRR Method in Real Estate Explained

Written by JD Esajian

Are you considering diving into the world of real estate investment, or looking to refine your existing strategy? The BRRRR method in real estate offers a systematic approach to building your portfolio, whether you’re a beginner or a seasoned investor. This method, celebrated for its effectiveness and scalability, serves as a powerful roadmap for those looking to maximize their investment returns.

BRRRR Meaning

The BRRRR method in real estate is more than just a catchy acronym; it’s a strategic, step-by-step process that guides investors through buying, rehabbing, renting, refinancing, and repeating. Let’s break down each component:

  1. Buy: The first step in the BRRRR method in real estate is to purchase a property with potential. Look for undervalued properties in desirable areas, as these offer the best opportunity for value appreciation after renovations. It’s essential to conduct thorough research and analysis to identify the right deal.

  2. Rehab: Here, the goal is to increase the property’s value through strategic renovations. Focus on improvements that boost appeal and functionality without overspending. Effective rehab not only enhances the property’s value but also attracts quality tenants.

  3. Rent: After rehabbing, it’s time to generate income by renting out the property. Set a competitive rent price to ensure a steady cash flow. Effective property management is key to maintaining the property’s condition and value.

  4. Refinance: With the property upgraded and income flowing, refinancing allows you to recover your initial investment. This step in the BRRRR method in real estate involves securing a new mortgage, ideally with more favorable terms, leveraging the increased value of the property.

  5. Repeat: The final stage is where the BRRRR method in real estate truly shines. By repeating the process, you can scale your real estate portfolio, leveraging the successes and learnings from each cycle to grow your investment.

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Tips For Every Step In The BRRRR Strategy


The initial ‘B’ in the BRRRR method stands for ‘Buy,’ a phase that serves as the foundation of your investment journey. This crucial step involves meticulous analysis to ensure that the property you choose is both a sound investment and a viable rental option.

Conducting an intensive deal analysis is imperative. This includes calculating the renovation costs, estimating monthly rental expenses, and ensuring that the projected rental income will yield a satisfactory profit margin. A key aspect of this phase is researching the most lucrative rental markets and making sure the purchase price leaves enough room for necessary renovations. Many investors use the 70 percent rule – a guideline that helps in determining the maximum offer for a property by considering repair costs and the expected value after repairs. This rule is instrumental in maintaining a profit margin even after property renovations.


Rehabilitation, or the first ‘R’ in the BRRRR strategy, is about making your property both livable and appealing. Initially, focus on essential updates and repairs. After these fundamentals are in place, consider value-adding renovations that can justify higher rental rates. However, it’s crucial to avoid over-investing in upgrades that exceed the potential rental income.

Each step of the rehab phase demands a careful cost-benefit analysis. Prioritize renovations that offer a high return on investment (ROI). High ROI projects include roof repairs, which often recoup their cost in property value, and kitchen updates, which can significantly enhance a property’s appeal. Repairing drywall, a relatively inexpensive fix, can also increase property value, as can straightforward landscaping projects. Updating bathrooms and adding bedrooms, particularly in larger homes, are other effective ways to boost a property’s market competitiveness.


After rehabilitating the property, the focus shifts to the rental phase. This involves tenant screening, managing turnovers, and handling maintenance requests. The success of this phase is a litmus test for your due diligence in the previous steps. Challenges such as vacancies, problematic tenants, or expenses outstripping income can quickly escalate, increasing the risk of financial strain. While these realities underscore the challenges of being a landlord, they also highlight the importance of thorough preparation and analysis before committing to an investment.


Following successful rehabilitation and rental, the next step is to refinance your property. Options vary, with some banks offering cash-out refinancing and others merely covering outstanding debts. Opt for a cash-out refinance when possible. Be mindful of the ‘seasoning period’ required by lenders, which dictates how long you must own the property before it’s eligible for refinancing based on its appraised value. Although finding a lender willing to refinance single-family rental properties can be challenging, leveraging your network can lead you to suitable refinancing options.


The final phase allows you to leverage the cash obtained from refinancing your first rental property to fund subsequent investments. The advantages of a cash-out refinance include favorable interest rates, potential tax benefits, and control over your financial timeline. Although the first BRRRR cycle might present a steep learning curve with its share of challenges and mistakes, the experience and insights gained lay a solid foundation for future investments, enabling you to approach your next properties with increased confidence and expertise.

BRRRR Method Example

To better understand the BRRRR method in real estate, consider this detailed example:

Imagine an investor identifies a potential property in a promising neighborhood. The property is priced at $100,000, which is below market value due to its need for renovations. The investor proceeds with the first step of the BRRRR method:

  1. Buy: The property is purchased for $100,000. The investor uses a combination of their savings and a loan to finance this purchase.

  2. Rehab: The investor allocates $30,000 for renovations. These improvements include modernizing the kitchen and bathrooms, repainting, and landscaping. After the rehab, the property’s value increases to $160,000.

  3. Rent: The upgraded property is now ready for tenants. The investor sets a monthly rent of $1,200, which is competitive for the area and property type. This rental income begins to offset mortgage and maintenance costs.

  4. Refinance: With the property now valued at $160,000, the investor opts to refinance. A new mortgage is secured against the property at 75% of its new value, equating to $120,000. This new loan pays off the remaining balance of the original mortgage and puts some cash back into the investor’s hands, partially reimbursing the renovation costs.

  5. Repeat: Using the equity gained from this property and the lessons learned, the investor is now poised to repeat the process. They can use the funds from refinancing, along with additional savings or loan options, to purchase and rehabilitate another property, thereby expanding their real estate portfolio.

This example showcases how the BRRRR method in real estate can effectively increase an investor’s property value, create a steady income stream, and provide a pathway to reinvest and expand their real estate portfolio.

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brrrr meaning

BRRRR Method Pros & Cons

There are numerous factors to consider before tackling the BRRRR strategy ranging from your schedule to financing, tax incentives to holding periods. Read through the following pros and cons to learn more about what you’re diving into.


Any investing strategy will promise certain advantages while bearing some level of risk, and the BRRRR method is no exception. Before executing any strategy, make sure to review the pros and determine for yourself whether or not BRRRR is appealing for you:

  • Financial Leverage and Return on Investment: The BRRRR method in real estate allows investors to leverage their initial investment to potentially secure higher returns. By refinancing and withdrawing equity, investors can reinvest in more properties, amplifying their portfolio’s growth.

  • Value Addition through Rehab: Strategic renovations can significantly increase a property’s value. This not only enhances the potential rental income but also the overall asset value, contributing to long-term wealth accumulation.

  • Cash Flow and Passive Income: Renting out properties provides a steady stream of passive income. This can contribute to covering mortgage payments and other expenses, making the BRRRR method financially sustainable.

  • Scalability: The BRRRR method’s repeatable nature enables investors to systematically expand their real estate portfolio, applying lessons learned from each cycle to optimize future investments.

BRRRR Strategy Cons

The following list helps to shed some light on potential risks associated with the BRRRR strategy. However, it should be noted that these points are not necessarily cons or disadvantages. Rather, they warn investors of what can happen if they are not careful and have not minded their due diligence:

  • Market Risks and Unforeseen Costs: Real estate markets can be unpredictable. Factors like fluctuating property values, unexpected renovation costs, or difficulties in refinancing can pose risks to the BRRRR strategy.

  • Management Intensive: Effective property management is crucial. This includes dealing with tenant issues, maintenance, and ensuring steady rental income, which can be demanding and time-consuming.

  • Waiting period: BRRRR is a strategy associated with a longer time horizon, which includes at least two waiting periods. The first is during the rehab phase, where the investor must improve a property before they can place tenants and start earning income. The second waiting period is seasoning, a term that describes the period an investor must wait before a lender allows a cash-out refinance.

  • Capital Intensive: The initial phase of buying and rehabbing properties requires significant capital. This might pose a challenge, especially for new investors without substantial financial backing. Learning creative financing strategies is crucial for those without deep pockets.


The BRRRR method in real estate is a powerful strategy for those looking to invest in property. By buying undervalued properties, rehabilitating them, renting them out, refinancing, and repeating the process, investors can create a robust and growing portfolio. While it offers the potential for substantial returns and portfolio growth, it also comes with its own set of challenges, including market risks and the need for active management. If you’re considering the BRRRR method, it’s essential to weigh these pros and cons, assess your financial capacity, and embark on thorough market research to ensure success in your real estate investment journey.

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