BRRRR Guide
BRRRR means Buy, Rehab, Rent, Refinance, Repeat. Here is how it works, with lessons from my own deals.
Buy
Look for properties that need work and are priced below what they'll be worth fixed up. Agents, wholesalers and direct leads can all find them. Run your numbers first, then decide how to fund it: cash, a HELOC, hard money or private money.
Rehab
Build a scope and a budget before you buy, get bids, and add a cushion for surprises. Spend on repairs that make the house rentable and help it appraise well. Keep the timeline tight, because every month costs you holding costs.
Rent
Price the rent at market, screen tenants carefully, and sign a solid lease. Some lenders want a signed lease before they refinance, so get a good tenant in fast. What matters is cash flow after the mortgage, taxes, insurance, repairs and vacancy.
Refinance
A cash-out refinance pays off your first loan and pulls cash back out. The appraisal sets the number, and lenders often lend up to about 75% of the appraised value on a rental. Ask your lender about seasoning rules, meaning how long you must own the house first.
Repeat
Put the cash you pulled out into the next deal. Same money, more properties. Each deal should cash flow and leave as little of your money in it as possible.
Run these numbers before you buy
- Purchase price and closing costs
- Rehab budget, plus a cushion
- Holding costs while you rehab: loan interest, taxes, insurance, utilities
- After repair value (ARV), based on comparable sales
- Expected rent
- Refinance amount and the new monthly payment
- Cash left in the deal and monthly cash flow
Lessons from my deals
- Run the numbers on every deal. Don't buy on a feeling.
- A low appraisal isn't final. On my Fortville deal it came in at $200K and I got it raised to $238K.
- Not every deal returns every dollar. I look at cash left in the deal and monthly cash flow together.
- My first three BRRRRs cash flow $200, $400 and $200 a month.
Run your numbers with the calculator →
This guide is general information, not financial, legal or tax advice. Lending rules and terms change. Talk to your lender and your CPA about your own situation.
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