Real Estate Investing Guide: The BRRRR Strategy

BRRRR is one of the most popular real estate investing strategies both for beginners and seasoned real estate investors. This investing method combines active and passive income in a way that allows you to consistently build wealth through real estate investing. Here's what the BRRRR strategy is all about and how you can get started.

What Is the BRRRR Investing Strategy

Most simply put, BRRRR stands for buy, rehab, rent, refinance, repeat. Investors who use this strategy are able to build significant passive income over time. If you think about it, there's really nothing too complicated about this strategy. Its very name tells you exactly what you need to do and in what order.

The goal behind the strategy is to purchase a rental property and use the rental income to pay for the mortgage and secure profits. While you're at it, you will build equity over time so you can eventually purchase a second property after refinancing the first one. 

The great thing about the BRRRR strategy is that you can do it over and over again. Once you get it right the first time, nothing is going to stop you from repeating the process countless amounts of time to build wealth and passive income. Here’s a step by step of what the BRRRR strategy includes. 

Buy

The first step to following the BRRRR strategy is to buy a property, which is definitely easier said than done. This is one of the most crucial phrases of the entire process, as it includes a long list of steps from choosing and analyzing a market, finding the property, negotiating the right deal and completing the transaction.

Rehab

The next “R” stands for Rehab, which includes the renovation of the property on many levels. As an investor, you have to identify what needs to be renovated in the property in order to boost its value. However, it is equally important not to make any excessive upgrades, as this could push your property out of its market’s boundaries.

Look for home improvement projects that will boost the value of the property and increase your return on investment. This can include roof repairs, kitchen updates and renovations, drywall repair, landscaping, updating bathrooms and bedrooms, etc. You can learn what renovations you should be aiming for here.

Rent

After renovation, your next step would be to rent the property out. This process includes marketing the property and finding the right tenants. It is important to screen the tenants properly to avoid problems later down the road. The proper tenant screening strategies are also included in Your First Income Property Program. If you don’t take time to select the right tenants, you’re risking issues such as evictions, vacancies, and overall poor experiences with bad tenants.

Refinance

After renting out the property, you can move on to the next step - planning the refinancing. Many banks will offer a cash-out refinance on your investment, whereas some banks will only pay the outstanding debt. It is always better to go for the first option if that is possible. Refinancing multi-unit properties is far easier than refinancing single-family rental properties. 

Repeat

Once the refinancing is done, you’re ready to move on to the next rental property. The whole point of the BRRRR strategy is to rinse and repeat once it's done. After the first cycle of the BRRRR strategy, the goal is to do it all over again as many times as you can. That way, you will build your investing portfolio and set up multiple sources of passive income to secure financial freedom in the future.