What is the BRRRR method?
BRRRR stands for “Buy, Rehab, Rent, Refinance, Repeat.”
This real estate investment strategy involves rehabbing run-down homes, renting them out, and then using home equity from the rental to buy your next property.
Many investors have found that following the BRRRR method allows them to build a small empire of rental homes, a continuing passive income, and a net worth that grows over the years.
But of course, real estate investing — not to mention rehabilitating older homes — isn’t for everyone. So you should understand all the ins and outs before getting started.
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About the BRRRR method
Before we get into the pros and cons of the BRRRR method, let’s establish what the abbreviation stands for:
- Buy — Find and buy a distressed or underpriced home to purchase
- Rehab — Bring the home up to code so it’s safe. Then renovate to make it attractive to renters
- Rent — Find and screen a creditworthy, reliable renter to bring in
- Refinance — With the renter in residence, do a cash-out refinance on the property
- Repeat — Use the proceeds from your cash-out refinance to find and buy another distressed home at a low price. And keep repeating as often as you can
Of course, the BRRRR method sounds much simpler than it is. There will be a lot of time, money, and work involved to get off the ground and keep your investment portfolio growing.
Those who succeed are likely to be hardworking risk-takers with business savvy, construction skills, and real estate knowledge. They should also be comfortable with periods of financial stress (for instance, when you’re spending cash to buy and rehab property, but don’t yet have any rental income flowing in).
If that sounds like you, though, the BRRRR method could be your ticket to real estate wealth.
Step-by-step guide to the BRRRR method
First, let’s dig into what the BRRRR method really entails at each step of the process.
To start, you need to find a home to which you can add significant value when you rehab it.
Ideally, the property should be one where most of the work is either minor or cosmetic: for example, remodeling the kitchen, laying new floors, improving energy efficiency, and so on. But certain structural issues are fine, providing …….