Your Guide to the BRRRR Method in Real Estate Investing
Updated: May 11
The world of real estate investing can be overwhelming, but the BRRRR method has become a favourite among investors looking to build wealth in real estate. The acronym stands for Buy, Rehab, Rent, Refinance, and Repeat, and it's a powerful strategy that allows investors to recycle their capital and leverage their equity to purchase additional properties. In this blog post, we'll take a closer look at the BRRRR method and how it can help you build wealth in real estate.
The first step in the BRRRR method is to buy a property. This can be a distressed property, an outdated property, or a property that's undervalued for some other reason. The key is to find a property that has the potential to increase the value of a property through improvements and renovations. By increasing the value of the property, investors can create equity and build wealth more quickly.
Once you've purchased a property, the next step is to rehab it. This can involve anything from minor cosmetic upgrades to major structural improvements. The goal is to increase the value of the property so that you can generate a profit when you sell or refinance it. To maximize your return on investment, it's important to focus on upgrades that will have the most impact on the property's value. This could include updating the kitchen and bathrooms, replacing outdated fixtures, or adding a new coat of paint.
After you've rehabbed the property, the next step is to rent it out. Ideally, you want to generate a monthly positive cash flow from the property or at least enough to cover your expenses, including the mortgage payment, property taxes, insurance, and maintenance costs. Any cash flow can be used to pay down the mortgage, reinvest in the property, or purchase additional properties.
Once the property is rented out and generating cash flow, the next step is to refinance it. Refinancing the property allows you to pull out equity and use it to purchase additional properties or reinvest in the existing property. This is where the BRRRR method gets really powerful. By pulling out equity and reinvesting it, you can multiply your returns and build wealth more quickly. *Hint: talk to your mortgage broker ahead of time to make a plan, since the more you do this the harder it can be to get financing from a major institution. There are always private lenders available however! Reach out for more information on this.
Finally, it's time to repeat the process. You can use the equity you've pulled out to purchase another property and repeat the BRRRR method. The more properties you own, the more equity you can create, and the faster you can build wealth in real estate.
This strategy is one that we have used, and it can be an extremely powerful way to build your portfolio. By buying undervalued properties, rehabbing them to increase their value, renting them out to generate cash flow, refinancing to pull out equity, and repeating the process, investors can build wealth more quickly than through traditional methods of real estate investing. If you're looking to build wealth in real estate, reach out to chat about how you can take advantage of the BRRRR method.