How to Invest in Real Estate With the BRRRR Method

The BRRRR method is a great way for real estate investors to build a passive income if they’re willing and able to put in the work. It’s also much better than traditional financing if your goal is to own more than one or two properties. With the BRRRR method, you can recover the largest of your capital out of a project as possible.

What Does BRRRR mean?

BRRRR means “buy, rehab, rent, refinance, repeat.” It’s an acronym for the smart investor’s investment cycle and should be repeated in that order.

This method focuses on finding a distressed property that can be purchased at a reduced cost, rehabbing or flipping the property, renting it out, getting a cash-out to refinance, and then using that cash to invest in more properties.

This method is ideal for those who have a good understanding of the rental market in their area as well as rehab costs. Getting good at this method takes some time and has a learning curve, but once done correctly, The BRRRR Method is a sustainable way to buy homes quickly and generate passive income.

How the BRRRR method works

When you buy a property, fix it up, improve its value, and then refinance, you’re borrowing against the value of the property at its highest. Done correctly, this allows you to recover more of—or sometimes all of—the money you invested in the property.

Here’s what you need to know.

1. Buy

They say you make your money when you buy, and that’s definitely true. But to paraphrase Tolstoy’s opening line of Anna Karenina, all good deals involve a good purchase, but each bad deal is bad in its own way.

Most lenders will finance 75% of a property’s value, so holders should aim for 75% all-in. And they generally do— because they have some money to leave in the deals and prioritize volume. If that doesn’t describe you, I would argue you should stick with the 70% guideline for two reasons.

1. Refinancing costs money. Most banks charge a point; appraisal, title work, and loan processing fees will eat away at your margin.
2. Aiming for 75% offers no contingency. People go over budget more often than under budget, so building in a bit more of a margin is a better idea unless you are going for volume.

Several options can help you purchase a rental property, such as cash, a hard money loan, seller financing, or a private loan. Deciding which upfront financing to use is outside this article’s scope, but what’s important to note here is that different upfront financing options will result in the different acquisition and holding costs. When analyzing a deal, you need to account for those to hit your 70% or 75% goal.

So what’s the key to BRRRR success? Buying properties under market value and never investing more than 75% of the property’s after-repair value (ARV). This ensures you never run out of capital and can continue buying forever.

Let’s start with your ARV. I recommend having a trusted source like an experienced agent, lender, or other investor give you a conservative number they believe the house will appraise for once it’s been repaired the way you intend. Multiply that number by .75. This is your “target.” Your goal is to get the rehab and the purchase price to add up to this target goal.

If you pay too much for a property, there is very little you can do to recover from surprises and problems.

2. Rehab

There are two key questions to keep in mind when rehabbing a rental.

1. What do I need to do to make this house livable and functional?
2. What rehab decisions can I make that will add more value than their cost?

If you rehab correctly and make sure you add value when you do, you are pretty much guaranteed to recover your money—and then some. However, unless you buy and hold luxury rentals, generally speaking, these things aren’t necessary:

• Granite countertops
• Brazilian hardwood floors
• High-end stainless steel appliances
• Bay windows
• Skylights
• Hot tubs
• Chandeliers

It’s also rarely worth finishing a basement or a garage for a rental. Instead, consider changes like two-tone paint, refinished hardwoods, and new tile.

And, of course, the house needs to be in good shape. Everything needs to be functional. Being a slumlord and the industry’s reputation will hurt you in the long run.

Of course, your new investment won’t be in good shape when you purchase it. That’s the point! I intentionally look for properties that need massive repairs because I know other investors will ignore them, and the sellers will be more motivated to drop their prices.

Some of the best problems to look for are:

• Roofs. If you add a new roof, appraisers tend to give you back the money you spent on the property value.
• Unfinished kitchens. An outdated kitchen is ugly but still usable. A partially demoed kitchen makes a house ineligible for financing and, therefore, much easier to buy with cash.
• Drywall damage. Drywall damage makes a property ineligible for financing while also scaring away most home buyers. The good news? The drywall isn’t super expensive to repair.
• Horrific landscaping. Overgrown vegetation frightens the competition but costs very little to repair. You don’t need a skilled landscaper to hack down overgrown landscaping, so a few hundred dollars will take you farther than you think.
• Outdated bathrooms. I routinely completely remodel bathrooms for $3,000 to $5,000. Most bathrooms aren’t huge, so the material and labor costs come in low. This allows your house to compare to much nicer homes in the neighborhood with higher ARVs.
• Too few bedrooms. Homes with more than 1,200 square feet but less than three bedrooms offer easy ways to add value. Adding a third or fourth bedroom helps it compare to much more expensive properties, increasing your ARV.

By targeting properties like these and making repairs at below-market value, you can add big equity to your deals.

3. Rent

Banks rarely want to refinance a property that isn’t occupied, so renting your house comes first. It’s critical to screen diligently so you get tenants that will pay each month. But it’s also important on the financing side. While appraisers shouldn’t put too much value on how clean and pleasant the tenant is, everyone is human. First impressions make a difference.

You need to notify the tenant before an appraisal. I always recommend you request interior appraisals versus drive-bys: Appraisers are more cautious and may downgrade your property unfairly with drive-bys. Send out or post a note on your tenant’s door about the date and time and give a reminder call the day before unless your local laws require something else. Tenants don’t need to be present, but you should ask them to clean up and kennel any pets if they aren’t home.

One thing to remember with the BRRRR strategy: Your mortgage will typically be slightly higher than the traditional method because you are borrowing more money against the house. This is well worth it. Capital in the bank can be used to grow wealth, while you can’t use the equity in a property for much. The flip side of this argument is that your cash flow will be slightly lower with the higher mortgage payment.

This means you have to be that much more careful when running rental comps to know what you can expect for rent once you purchase your property.

What is the 1% rule in BRRRR?

The 1% rule is a simple metric to identify a property’s positive cash flow likelihood. Basically, if you can rent a property for 1% of the price you paid for it, it passes the 1% rule. This metric is very important for BRRRR investors looking to keep properties as rentals rather than flipping them. 

If you buy a property for $100,000 and you can rent it out for $1,000, it follows the 1% rule. Buying a property for $200,000 and renting it for $2,000 follows the rule. 

However, the 1% rule isn’t the be-all-end-all rule of BRRRR investments. Think of it as a preliminary screening procedure. There are many other variables to consider when applying the 1% rule, like HOA dues and high property taxes. Also, the more expensive a property is, the less likely it is to conform to the rule. Just because you’re not getting $6,000 in rent for a $600,000 unit doesn’t mean it’s a bad investment. It just means you should dig deeper into the property’s financials to determine if it’s worth investing in. 

4. Refinance

Not too long ago, finding a bank willing to refinance single-family rental properties was tough. Now it’s much easier. Still, when looking for such banks, there are a few things that you will need to ask.

1. Do they offer cash out, or will they only pay off debt? If they don’t offer cash out, move on.
2. What seasoning period do they require? A “seasoning period” is how long you have to own a property before the bank lends on the appraised value instead of how much you’ve invested. For the BRRRR strategy to work, you must borrow on the appraised value. These days, some banks are willing to lend on the appraised value as soon as a property has been rehabbed and rented. These are the best banks to find.

To find great BRRRR banks, ask around. Ask investors you know, or query the BiggerPockets Forums users. A bank already lending to another investor will likely lend to you, too.

Here’s another unique way to find banks to help you refinance your property. Go to a website such as ListSource or CoreLogic and search for every loan made in your city and price range in the last year to non-owner occupants. This search will probably cost a couple of hundred dollars.

Right off the bat, you know these banks lend to investors at the price point you require. They’ve done it before, so there is a good chance they will do it again.

Provide the lender with thorough, clear information. This impresses them—remember, these are human beings, not computers—and helps them decide quickly.

The trick to success here is getting as high an appraised value as possible. A big part of success in this area is a combination of how well you rehabbed your property and how strong your initial comps were.

Sinking a lot of capital into a deal and then failing to pull it out is a big problem. I recommend getting pre-approved for a loan before buying.

5. Repeat

The “repeat” part of the BRRRR cycle is the most fun. Take everything you learned, gained, and improved upon and put it back into action.

Work on building systems, too. Systems help you accomplish your objectives by repeating the same process over and over. Systems cut down on mistakes and stress. The more documented your systems are, the less you’ll worry about something being missed, overseen, or forgotten about.

The BRRRR Method vs Traditional Real Estate Investing

BRRRR beats the traditional method of real estate investing because it allows you to recover the capital you left behind.

The traditional method involves putting a percentage of the home’s value down upfront when the home’s value is the lowest. Think about it: Investors are always looking for deals. If an investor does their job well, they pay less for a property than it is worth. Banks base the amount of money they will let you borrow off of the purchase price of a property. If you pay $70,000 for a $100,000 property, the bank lets you borrow a percentage of that $70,000.

The loan-to-value (LTV) ratio determines that percentage. If a bank allows an 80% LTV, the borrower needs 20% for a down payment. Higher LTVs equal less money down for the investor.

This down payment gets left in the deal when you use the traditional method. That means if you pay $70,000 for that $100,000 home and put 25% down, you drop $17,500 for the down payment. You’ll still need money for the rehab.

Every deal is different, but the rehab budget for most houses purchased the traditional way equals 20% of the home’s ARV (after-repair value). In this example, that would be $20,000. Negotiating that cost down half leaves you with a $10,000 rehab budget. When all is said and done, you will have spent $80,000 ($70,000 purchase price plus $10,000 rehab) for an investment property worth $100,000. The good news? You’ve gained $20,000 in equity. The bad news? You dropped $27,500 of your hard-earned money to do so.

Leaving your down payment in the property as equity hurts your ability to buy more properties. Leaving your rehab budget in the property hurts your ability to buy more properties—and discourages you from spending more money to create more equity.

The traditional method hurts your deal flow

Maintaining investment capital is crucial to finding better deals and growing your investments. Investment masters are active in the game. Using the traditional method, you simply run out of money too fast.

If you want to land hot deals, you must be ready, willing, and able to close. If you’re not in a position to move, someone else will swoop in and buy it before you can.

Traditional method loans slow you down. Lenders require appraisals, and they also require livable properties. Many of the best properties aren’t in great shape, so they’re priced so low!

The traditional method also causes investors to run out of capital quickly, miss out on truly distressed properties, and close slowly. These factors hurt your odds of landing the contract first.

The traditional method stops your wealth from growing

Buying properties under market value is the best way to grow your wealth. In the earlier example, you spent $80,000 on a property worth $100,000. This added $20,000 to your net worth before appreciation, loan paydown, and cash flow.

With every house you buy traditionally, you add another $20,000 to your net worth. Doing this every two months adds $120,000 to your net worth. In a little over four years, you would have accumulated a net worth of a million dollars. Not too shabby—right?

Except you needed $27,500 of cash to add $20,000 to your net worth. This prevents you from buying more, slows your growth, and limits other aspects of investing, like getting the best deals first.

If you want to grow your wealth quickly, efficiently, and safely, you need to acquire cash-flowing rentals—quickly. Think of buying rentals like planting trees. Every year that tree grows, puts off more fruit and increases in value—most of the time. The wealthiest own orchards, not small gardens.

Can you grow an orchard using the traditional method? Maybe if you have a ton of cash lying around. Even then, it would still be slower than with BRRRR.

BRRRR Method Pros

The BRRRR method is a real estate investment strategy with many risks and rewards. Here are the most notable benefits:

Little-to-no money down 

You don’t need to save a large sum of money to start implementing the BRRRR method. Some investors can land deals with no out-of-pocket costs! How much you need depends largely on rehab costs and your loan’s terms. Pro tip: Some construction lenders will require you to provide less down with a full prequalification from a take-out lender. 

Potentially high return on investment (ROI)

Your ROI for real estate investing can be astronomical. For example, let’s say Bailey’s total out-of-pocket costs were $10,000 (her cash-out refinance covered her loan and other expenses), and her yearly net rental income is $3,000. She’s making a 30% cash-on-cash return each year. Also, she’ll enjoy that income perpetually as long as she has tenants and manages it as a rental property.

It’s scalable

The BRRRR real estate investing strategy is scalable. Once you’ve gone through the initial steps, they become easy to replicate—and each time you do, you’ll become that much wiser and (when successful) more financially comfortable. 

Imagine if Bailey expands her real estate business from one investment property to five, each with the same rental income. She’ll be making $15,000 a year from her initial $10,000 investment, and that’s still not including equity gains. Speaking of…

You’re building equity

Rental income isn’t the only way to enjoy a high ROI. You’re also building equity—and since you’re rehabbing your property to increase its value—you’re building equity quickly. BRRRR properties are unique in nature. They give you amazing cash-on-cash return investments and can expedite your net worth every time you close. Based on the 70% principal, every BRRRR will increase your net worth by a 30% equity gain. 

You’re increasing the velocity of your money

The velocity of money is more than just a cool term. It describes how you can make the same source of capital work for you over and over again. For example, if you buy a property that earns you a 10% return each year, you’ll have to wait ten years before you get your money back to reinvest again. With the BRRRR method, you can buy a property and pull out 100% of the capital you put into it, then immediately buy another property.

That money adds up. Let’s say James pulls out 100% of his cash from each BRRRR deal he makes, and buys a new property every three months for five years. Let’s assume he averages $25,000 in equity and $400 in cash flow for each home he BRRRRs, and increases the rent by 5% each year for five years. At the end of five years–-even if none of his then-20 properties appreciates in value—James will have added $500,000 to his net worth (20 houses at $25,000 in equity each) and $13,000 in passive income cash flow (20 houses at $650/mo). Go, James! 

You can achieve economies of scale

Once you own multiple rental properties, you can achieve economies of scale. Economies of scale are the cost advantages you enjoy when you become an efficient investor. If Bailey owns five properties instead of one, she can reduce her costs by spreading her risk and lowering her average cost per property.

You’re gaining invaluable real estate investment experience

Owning and managing real estate investment properties can be tricky. With the BRRRR approach, you’ll learn by doing so with minimal upfront costs. You’ll get an intimate knowledge of the real estate market, construction, and design, and learn how to be a landlord. You’ll also gain valuable experience as a business owner for less money than most startups cost.

BRRRR Method Cons

No investment strategy is without risk. All you can do is mitigate that risk as best you can. Here are a few drawbacks of the BRRRR method you should be wary of:

You can go over budget

Once you buy, you want to make your property functional and livable ASAP. Hire a general contractor you trust to inspect the property, then consult with an investor-friendly real estate agent before purchasing. You should know:

• What repairs must be made?
• Who is making them?
• How long they’ll take
• How much they’ll cost

Don’t let the rehab phase become your regret phase. When making your budget, you need to be as thorough as possible. It never hurts to increase your total estimations by 10%, or even 25%, if you’re a newbie. 

Renovations can easily go over budget, take longer than anticipated, and/or lead to more necessary repairs. Be financially prepared for any potential setbacks. When looking at your next BRRRR property, you can mitigate these risks by adding contingencies to the rehab total and adding an extra month of hold time for delays.

You risk getting a low appraisal

Get your property appraised after the rehab phase is over. If your initial calculations about your ARV were right, then you’re good to go. However, if your ARV goal is $300,000 but it’s only appraised for $275,000, the $25,000 difference cuts into your net gains. 

Short-term loans are expensive

It’s best to get through the rehab and rent phases quickly. The faster you can refinance your property and get a conventional loan, the sooner you’ll stop hemorrhaging money. Pro tip: The benefit of hard money is that you can often put less money down than a conventional lender. On many occasions, they will include the costs of your renovation in your loan.

There are two or more waiting periods

The BRRRR strategy has at least two waiting periods: 

• The first period is your rehab phase. It takes time to make the necessary repairs and renovations before you can rent out your property. 
• The second period is the seasoning period. As a reminder, this is how long you have to wait to get your cash-out to refinance approved.

Your property could be hard to rent out

You’ll experience a third waiting period if you have trouble finding tenants. You want to find tenants quickly, but you also need to be selective. 

In our house hacking guide, we suggest coming up with some guidelines for your tenants to meet, including: 

• Minimum income-to-rent ratio
• Minimum credit score
• Positive references
• Clean background check
• Job stability and steady income
• Do they smoke?
• Do they have a pet?

Once you find the right tenant, your property could generate rental income for years.

Seasoning

If you manage to buy, rehab, and rent your property in just a few months—good for you! 

Unfortunately, most refinancing banks will require you to wait six or even 12 months between the time you buy and when you can refinance. If your short-term loan is shorter than your seasoning period, you could end up in trouble. We recommend a short-term loan for at least 18 months, just in case problems arise. 

Who Is The BRRRR Method Best For?

The BRRRR method isn’t for everyone. BRRRR investors need to devote time to identifying worthwhile properties, rehabbing them, and then serving as a landlord for potentially multiple tenants simultaneously. You also need to have knowledge and experience in real estate and a keen eye when it comes to renovations. If you fail to miscalculate market value, rehab costs, or failure to secure tenants when you need them, you can take a loss. 

If you’re going to BRRRR, we don’t recommend doing it alone. Work with a team of skilled experts who have the time and know-how to make the most of the BRRRR experience. 

How Do You Get Your Money Back With BRRRR?

You earn your money back for a BRRRR in the refinancing stage. When you work with a lender who offers cash-out refinancing, you can convert your home equity into cash. 

For example, Jason purchased a distressed property for $160,000. His combined costs for everything else (e.g. homeownership costs, renovations, etc.) are $40,000, and the home’s ARV is $280,000. When Jason takes out a cash-out refinance, the lender gives him a new mortgage that’s more than his previous mortgage. The extra money first pays off his previous mortgage, but then the rest is his. Jason can take the extra money and invest in a new property, walk away happily, or bank some and invest the rest. In this equation, Jason would actually be leaving the difference of the rehab and purchase price – $4,000 plus the debt costs. He would leave around $10k in the deal.

Since your payday depends on cash-out refinancing, you’ve got to shop around to find your best loan options.

Is The BRRRR Method Risky?

This strategy gives investors the most bang for their buck. But that doesn’t mean there aren’t a few risks of BRRRR you should look into before diving in. Here are some considerations.

1. The short-term loan

If you have the cash to finance your first deal without getting a lender involved, this isn’t something to worry about. (And let’s not forget the hearty congratulations!) However, if you need financing, it’s important to consider the costs of the loan. What will your carrying costs look like? What kind of rate can you get? Remember, private and hard money lenders often charge higher interest rates, which can reduce your cash flow.

One alternative is using a home equity loan on an existing property. This gives you initial funding without quite the same risk.

2. Appraisal risks

Refinancing is an important part of BRRRR—otherwise, it would just be BRRR. However, refinancing involves a home appraisal, making careful math important. You’ll have trouble repeating the deal if you miscalculate your after-repair value and the property doesn’t appraise.

3. Waiting for seasoning

Here’s another refinancing annoyance: Many conventional and portfolio lenders require properties to “season” first. Seasoning means you’ll need to wait between six and 12 months before refinancing. If you’re using a private or hard money lender, it’s imperative to calculate exactly how much this period of time will cost you.

4. Rehab pains

You might love the idea of renovating houses, but the rehab stage is nothing like HGTV. Prepare to juggle absentee contractors, surprise problems like asbestos, and many other headaches. Rehabbing certainly isn’t a dealbreaker, but don’t stride into this stage wearing rose-colored glasses.

How To Pay For Your BRRRR

If you can fully fund your BRRRR, that’s great! However, most of us don’t have $100,000s of disposable income, especially when new to real estate investing. Luckily, you have plenty of loan options and one that usually isn’t. We’ll start with that one first.

1. Use a HELOC

If you already own existing property—either an investment or your primary residence—a HELOC, or home equity line of credit can provide your startup capital.

This option lets you close in about 10 days, depending on your state, and means you won’t need an appraisal. But there’s a downside to that: You need to be spot-on when determining your ARV. Otherwise, you may lose your investment.

2. Try a conventional loan

This strategy isn’t ideal for BRRRR but is not completely infeasible. Start by talking with your current lender if you already own property. They can walk you through the ins and outs of financing a rehab with a conventional loan.

A few things to keep in mind: Conventional loans severely limit the types of properties you can purchase. And BRRRR works best when the property has big problems, like a bad roof or HVAC system. Additionally, conventional loans close significantly more slowly, which eliminates one of the major advantages of BRRRR.

3. Use hard money or a private lender

The right hard money lender will finance up to 90% of the purchase price and 100% of the construction. And when you’re buying, they’re treated like cash, keeping you competitive.

However, some hard money or private lenders will require an appraisal, which decreases your competitiveness. They’ll also pay close attention to potential rents and may have requirements for how much the property should bring in.

And then there’s the biggest downside: rates. These are typically much higher than a standard mortgage, so calculate your holding costs carefully.

Refinancing Your BRRRR

Assuming you’ve made it through the rehab and gotten your place rented, it’s time to refinance.

Pro tip: Plan your refinance before you buy. Think about it too late, and you might find yourself scrambling for an acceptable solution. There are two primary refinancing options.

1. Conventional financing

This is the most common option for BRRRR investors. It involves working with a traditional lender to procure a mortgage backed by Fannie Mae or Freddie Mac. (Although you should seek out lenders familiar with investors.) These loans can have up to 75% loan-to-value ratios.

Generally, these loans offer the lowest interest rates and fees and have no prepayment penalties. However, conventional lenders often have strict underwriting guidelines, so make sure you walk through the requirements before buying the property to prevent surprises.

2. Commercial financing

Commercial financing can be a fabulous choice for investors. It involves underwriting the property as income and can garner up to 80% loan-to-value.

However, unlike conventional financing, these loans offer higher interest rates and prepayment penalties, and you may have to guarantee the loan personally.

Consider looking for commercial lenders who do both rehab loans and commercial loans. That saves time and money.

Becoming A Black Belt Investor

The good news for you is that by following the principles that lead to a good BRRRR deal, and you will inevitably follow the same principles that lead to good real estate investing. By mastering the five elements of BRRRR, you will also master wealth-building through real estate.

A black belt martial artist practices specific movements, maneuvers, and techniques until they can perform them to perfection.

When investors do the same thing over and over, they too can reach a point where they can perform that action at a very high level. Through BRRRR, you recover a higher portion of your capital, which allows you to buy more deals and grow your net worth faster.

Become a black belt investor by doing more deals, which:

• Creates a reputation within the community of someone who can close. This means more deals will come your way.
• Builds your experience, making you smarter, faster, and better.
• It gets you better rates on your rehab projects from your contractors because you make them more money.
• It gives you a bigger portfolio, allowing you to pay less for property management fees.
• It provides the flexibility to earn more money by wholesaling, flipping, or selling your properties to other investors, turnkey style.
• It opens more leverage with local banks to get better financing terms.

There is value in volume. If you want to become a black belt investor, you need more repetition and more practice. This is much easier when you take advantage of the BRRRR method and your ability to create wealth by recovering more capital and buying more real estate.

BRRRR investing is the most efficient way to invest in real estate. It’s so powerful that I often tell investors not to buy anything until they can BRRRR. It will change your investing life and greatly impact your wealth.

Types of BRRRR Properties

You can apply the BRRRR method to most property types, including:

• Single-family homes
• Townhouses
• Condos
• Apartment Units
• Duplexes, tTriplexes, or fourplexes

If you’re new to real estate investing, we recommend starting small. Even if you have experience in construction and/or as a real estate agent, real estate investing has a huge learning curve. When something goes wrong (and something inevitably will), it’s best if you make a newbie mistake on a $50,000 condo, rather than a $1,000,000 fourplex. 

After BRRRR becomes second nature, you can start getting more ambitious and rehabbing larger spaces, converting offices into multi-family homes, or even break into commercial real estate! 

Tips for finding distressed properties

Here are seven surefire ways to find distressed properties to BRRRR:

• Multiple Listing Service (MLS): Real estate agents can find distressed properties on the MLS. Usually, real estate agents are the only ones with access to view the house in person. If you’re going the MLS route, work with an investor-friendly agent.
• Real estate sites: Popular real estate sites like Redfin, New Silver, Zillow, and Trulia get their syndicated data from the MLS. Some of these sites specifically list distressed properties, pre-foreclosures, foreclosures, and bank-owned homes.
• Online marketplaces: You can find distressed properties on sites like Facebook Marketplace and Craigslist.
• Networking and marketing: Join real estate investment groups to connect with investors, investor-friendly agents, lenders, and everywhere else in the real estate sphere. These people often have an ear to the ground and know what’s going on in the area—or at least what to look for! 
• Auctions: Many homes up for auction are under foreclosure, need repairs, and may even require you to evict the current tenants. To learn more about foreclosed properties and house auctions, check out Bidding to Buy by Aaron Amuchastegui and David Osborn.
• Driving for dollars: Don’t overthink it. Drive around up-and-coming neighborhoods or anywhere you believe people are looking to rent. Keep an eye out for homes in foreclosure or boarded up. It’s likely the owner wants to sell the property ASAP. 
• BiggerPockets Forums: Take advantage of our forums. Connect with other real estate professionals or inquire about properties in your area.

BRRRR Alternatives

The BRRRR strategy isn’t meant for everyone. According to the IRS, rental income is passive, but BRRRR is anything but! Much like house flipping, BRRRR requires you to be active in your investment every step of the way.

If you’re looking to become a more passive investor or want to assume less risk, here are a few alternatives to the BRRRR method:

Traditional buy and hold

The traditional method requires a lot less work than BRRRR, because you usually only do one of the R’s: renting your property to tenants. Depending on the condition of your property, you might have to do some rehabbing, but nothing compared to the level of work required when renovating a distressed property. 

Because the property is in great condition, you’ll qualify for a traditional bank loan. Once you do, you can rent it out and use the income to cover your mortgage and other expenses. You’ll grow your portfolio at a slower pace than with the BRRRR method, but it also requires a lot less work. 

Turnkey real estate

The turnkey strategy is similar to the traditional buy and hold, but with even less work required. Turnkey properties are completely renovated and ready for tenants immediately. Most turnkey investment providers will even select a renter for you, so you can start earning passive income the moment you close the deal.

Turnkey properties are almost as hands-off as you can get, but that’s not always a good thing. You’ll have less control over the appearance, layout, appliances, and other items, which could be an issue if you ever decide to live there. Also, because you’re investing in a property already in premium condition, your ROI will be less than it would with a successful BRRRR.Equity Crowdfunding

Equity crowdfunding is a viable way for real estate investors to diversify their investments and own several properties while assuming less risk. In real estate crowdfunding, multiple investors pool their funds to buy an investment property. It’s similar to how Kickstarter campaigns operate, except instead of getting a product or service, you’re building equity and reaping tax benefits. 

You can start equity crowdfunding with very little capital. You can start a portfolio with DiversyFund for $500. With Fundrise, all you need is $10!

Read the terms and conditions of your portfolio carefully. Equity crowdfunding investments are subject to fees, and fee structures vary from company to company. Also, some portfolio options don’t let you select which property(s) you invest in. 

Real estate investment trusts (REITs)

REITs are to real estate with mutual funds are to stocks. REITs allow you to invest in real estate assets by purchasing an exchange-traded fund (ETF), a mutual fund, or individual company stock. You then earn a share of the income without having to buy, sell, or manage a property. However, you may not see higher returns or tax benefits associated with property ownership. 

BRRRR Resources

The BRRRR method is a tried and true way to grow your real estate portfolio–fast! By mastering the BRRRR cycle, you’ll build wealth, gain real estate investment experience, and even achieve financial independence. All you have to do is buy, rehab, rent, refinance, repeat. 

Are you ready to hack the BRRRR method? Check out some of our helpful resources below!