The BRRRR Strategy Explained

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It's a strategy for building a rental portfolio while recycling your capital.

The Concept: Instead of leaving your down payment tied up in each property, you force appreciation through renovation, then refinance to pull out most (or all) of your initial investment.

Why It Works: You're essentially buying at wholesale prices, adding value through renovations, and extracting that value through refinancing—then using that money to repeat the process.

Ideal Outcome: Acquire a cash-flowing rental property with little to no money left in the deal.

Find properties below market value with value-add potential:

Where to Find Deals: - Foreclosures and bank-owned properties - Wholesalers - Direct mail campaigns - Driving for dollars (looking for distressed properties) - Estate sales - Off-market deals through networking

What to Look For: - Properties needing cosmetic updates (paint, flooring, fixtures) - Outdated kitchens and bathrooms - Poor curb appeal but good bones - Motivated sellers (divorce, relocation, inherited properties)

Target Purchase Price: 70-75% of After Repair Value (ARV) minus repair costs.

Example: ARV is $200,000, repairs cost $30,000 Target Purchase: ($200,000 × 0.70) - $30,000 = $110,000

Strategic renovations to maximize value without over-improving:

High-ROI Updates: - Fresh paint (neutral colors) - New flooring (LVP is durable and affordable) - Kitchen updates (cabinets, countertops, appliances) - Bathroom refreshes (vanity, toilet, fixtures) - Curb appeal (landscaping, front door, house numbers) - Updated lighting fixtures - New hardware throughout

Avoid Over-Improving: - Don't install granite countertops in a C-class neighborhood - Match renovations to neighborhood standards - Focus on durability for rentals over luxury

Contractor Tips: - Get 3+ bids for every major job - Check references and past work - Use Investra's contractor network - Create detailed scopes of work - Build in 10-20% contingency for surprises

Get the property occupied to stabilize income:

Tenant Screening Essentials: - Credit check (minimum score depends on market) - Criminal background check - Employment/income verification (3x rent is standard) - Landlord references (call previous landlords) - Consistent screening criteria to avoid fair housing issues

Setting Rent: - Research comparable rentals in the area - Consider amenities and recent updates - Price slightly below market for faster placement initially - Use Investra's rent estimates as a baseline

Professional Photos: Good photos attract better tenants faster.

Lease Terms: 12-month minimum typically required for refinancing.

Extract your invested capital through a cash-out refinance:

Typical Requirements: - 6-12 month seasoning period (time since purchase) - Property appraised at new value - Tenant in place with lease - 75-80% LTV on cash-out refinance

The Math Example: - Purchase: $110,000 - Rehab: $30,000 - Total Invested: $140,000 - After Repair Value: $200,000 - Cash-out at 75% LTV: $150,000 - Cash Returned: $150,000 - $140,000 = $10,000

Even Better Scenario: If your total cost was $130,000 and ARV is $200,000: - Cash-out at 75%: $150,000 - Cash back: $20,000 - Net result: Property acquired with money back!

Lender Options: - Traditional banks (lowest rates, stricter requirements) - Credit unions - Portfolio lenders - DSCR loans (qualify on rental income, not personal income)

Take the extracted capital and do it again:

Scaling Tips: - Build systems for each step - Develop contractor relationships - Create tenant screening checklists - Use property management after 4-5 properties - Track all expenses meticulously for taxes

Common Mistakes to Avoid: - Overestimating ARV - Underestimating rehab costs - Buying in declining neighborhoods - Skipping inspections - Not having cash reserves

Timeline Reality: - Find deal: 1-3 months - Close and rehab: 2-4 months - Rent and season: 6-12 months - Refinance: 1 month

One BRRRR cycle typically takes 12-18 months. With experience, you can run multiple deals simultaneously.