Build a Real Estate Portfolio with BRRRR

A popular investment strategy commonly adopted among real estate investors is the BRRRR method. BRRRR is an acronym for Buy, Rehab, Rent, Refinance, Repeat. The strategy is as simple as it sounds - purchase a distressed / undervalued property, renovate the property, rent the property, refinance the property, and then repeat the process. Let's explore how it works in a little more detail.

How the BRRRR Method Works

Here's a step-by-step breakdown of how the BRRRR method works:

1. (B)uy a property: The first step is to identify and purchase a property at a discounted price. The property doesn't necessarily have to be distressed but could be a property that has a value add component such as under market rents, under water sellers, or any type of undervalued property. However, most of the time, the buying step will involve a property that needs significant repair.

2. (R)ehab the property: After the property is acquired, the investor will need to repair to increase the property value. The upside in equity starts here. Be mindful of your fix up costs and only perform the necessary repairs/updates/upgrades that could achieve more rent and build more equity.

3. (R)ent out the property: After the renovations are complete, the property is ready to be rented out. Consult with a realtor and/or a property management company to indicate market rents and to assist in the renting process.

4. (R)efinance the property: As soon as the property is rented and assuming you have built equity, it's time to refinance and pull out a portion of the equity in the form of cash.

5. (R)epeat the process: With the funds obtained from the cash-out refinance, the investor can purchase another distressed property and repeat the cycle.

Is the BRRRR Method For You?

In conclusion, not every investor has the capacity or the drive to be hands on in regards to their real estate investments. Some choose to invest in turn key properties at a higher price because they simply don't have the time, energy, or the knowledge to implement a strategy like BRRRR. Some choose to buy single tenant NNN properties and become "coupon clippers" because they simply don't like the headache. If you have higher tolerance for risk and have the resources to take on rehab projects, the BRRRR method might be a fit for you.