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The BRRR Method

What is the BRRR Method?

The BRRR method stands for Buy, Rehab, Rent, and Refinance. (It is also frequently referred to as BRRRR Method for Buy, Rehab, Rent, Refinance and Repeat) It's a real estate investment strategy in which investors take a distressed property, rent it out and then refinance it to fund further investments.

One of the main differences between BRRRR and conventional property investing strategies is the focus on distressed properties and refinancing.

the BRRRR Method

How Does BRRRR Work?

When done correctly, the BRRRR method provides passive income through purchasing and owning rental property.

To ensure the best chance of success, its important to take the following steps in the correct order:

  • Buy a property: Investors using the BRRRR method should focus on buying properties that need work, but will also be sound investments. Before purchasing, do your research to know how much work you will have to perform. Luckily, The Investor's Edge offers the Find-Fund-Flip System and Investor’s Edge deal finding software to help investors find properties with high-profit potential and calculate their potential profits and after-repair value.
  • Rehab: The next step is determining which method you will use to renovate the property. For BRRRR, it’s best to understand the scope of work — you can focus on renovating areas of the home that will provide the highest return on investment. With The Investor's Edge, we can help you identify your estimated costs and how long it will take to complete the work.
  • Rent: As soon as renovations are complete, find a renter for your property to start generating passive income. At The Investor's Edge, our systems can help you market your new rental property to potential renters as soon as possible.
  • Refinance: After securing a renter, you will want to build your equity before starting the refinancing stage. Most banks are more likely to accept financing applications if an individual has a reliable renter and building equity. Refinancing your loan sooner is best, as most hard money loans typically have five to 12-month terms with high interest rates. When you choose The Investor's Edge as your BRRRR partner, our loan advisors and project managers can assist you at every step of the process.
  • Repeat: The last step makes the BRRRR so appealing and lucrative to investors. With the cash you earn from your refinance, you can invest in new properties and start the process again.
How Does BRRRR Work?

Why Choose The BRRRR Method?

Lower Entry Point - It’s a viable method for an investor to get into a rental property without having to purchase a nice property straight out.

Let’s say that you’re looking at a $400,000 property to use as a rental. A bank is going to want 20% of that down, with 6-12 months of cash in your account to cover maintenance and vacancies. That’s likely $100k+ to get into the deal.

Now, let’s say you’ve found a property with a purchase price of $180,000 with required repairs and loan/closing costs of another $100k. You calculate the after repair value (ARV) to also be $400,000.

Right from the start, you’re only borrowing $280k instead of $400k, but the end result is the same property value. Furthermore, with The Investor's Edge’s 100% financing program, it's possible to close a deal like this with $0 down.

Profit in Any Market - Owning a rental is a great hedge against the market. Sometimes, a fix and flip can turn against you if the market drops after your purchase. While that isn’t ideal for a BRRRR deal either, you can better weather that drop since your goal isn’t a big paycheck at the end.

In the past, we’ve also seen rents increase near-constantly over time. Even when housing prices crash, rental prices remain the same—or even sometimes go up as demand for renting increases.

Cash Flow - And perhaps the most obvious reason to get into rental properties is cash flow!

Having a backbone of rental properties in your portfolio provides a level of security. If another deal goes south, or if you can’t find a fix and flip property to take on, you at least have your rental income coming in, rain or shine.

Having that cash flow also gives you the ability to get into other investments as needed. 

Help People and Improve Neighborhoods

In addition to improving your bottom line, you’re helping both individuals and neighborhoods. As a real estate investor, you purchase properties from people in a bind. They need cash, but don’t have the time/means to sell their house. That’s where you step in with a solution.

You’re also improving the overall quality of the neighborhood that your deal resides in. By taking an eyesore property with a low value, you make the surrounding property more desirable and raise their values as well.

Why Choose The BRRRR Method?

The Biggest Challenges of the BRRRR Method

As with any investment, the BRRRR method offers investors some risks. A budget miscalculation or failure to secure a renter can cause significant monetary losses. 

Some of the biggest challenges an investor may face with the BRRRR method include:

Length of Time – You’re not only in the deal for the duration of the rehab, but also for the long haul as the owner of a rental property. You might see this as a positive, but not all do.

Securing Funding – We know the challenges of securing reliable funding for a real estate investment. It’s literally why we exist. We can make this process easy for you.

Managing the Rehab – Perhaps the most stressful part of any real estate investment. We do our best to help you by providing a former general contractor to be your project manager throughout the rehab process. 

Finding Renters – While our Member’s Area provides insight into how Ryan (our CEO) finds amazing renters time after time, we recognize this isn’t always a fun step—especially if you’re under a tight window.

Refinancing your Loan – As mentioned above, the hard money loan is to get you through the rehab process, but then you’ll need a conventional mortgage moving forward. Many banks require that you have prior experience as a rental owner and that you also have a decent amount of funds in the bank. We can’t guarantee we can find you a bank to work with you, but we can recommend ones that we’ve worked with before that have easier requirements for first-time rental property owners.

At The Investor's Edge, our loan advisors and project managers can assist in helping you develop a lucrative plan and discuss your next steps for greater investing success.

Our state-of-the-art real estate software makes the BRRRR method easy for beginners and experts to allow them to buy, rehab, rent, and refinance properties successfully.

The Biggest Challenges of the BRRRR Method

BRRRR vs. Fix and Flip vs. Wholesale

When determining what type of deal works for you, there are a number of factors to consider. Let’s look at them.

Your Financial Situation: Between those three types of deals, a BRRRR will usually require the most funds due to the long-term nature of owning rentals. Wholesale requires very little, and you’re out of a fix and flip within 6 months (ideally). 

A BRRRR deal results in you owning a long-term rental property. And while the cash flow is fantastic, you have to weigh that against your ability to cover vacancies, maintenance, and emergencies.

Your Financial Goals: What is your goal with real estate investing? Most investors eventually would like to have a diversified portfolio, but where do you want to start?

If your biggest goal from the start is passive cash flow, then you’re going to gravitate towards BRRRR deals.

If you need fast cash in order to fund other projects, pay off a credit card, or purchase something in the near future (like fixing your car or buying a new laptop), then a wholesale deal is the best way to go.

If you’re looking for the big payday and to be out of the deal in 6 months, then a fix and flip is the way to go.

The Property Itself: Once you take a look at the property, the ideal strategy often presents itself. For example, a property with minimal repairs would be ideal for a BRRRR property. You ca quickly do the renovation and get it rented out.

Or a property with a massive rehab requirement may turn you towards a wholesale deal. Let someone else deal with the headache while you walk away with $5k.

BRRRR vs. Fix and Flip vs. Wholesale

Your Risk Tolerance

Lowest Risk – Wholesale deals have clearly the lowest risk of these three deal types because there are few moving parts. They’re simple and require little capital on your part.

Medium Risk – Fix and flips carry more risk because they’re longer, more complicated, and require your own money or a loan.

Highest Risk – BRRRR deals are the riskiest because you have to go through the whole process of a fix and flip, as well as trying to find a new 30-year loan to refinance your hard money loan. You also need to find a renter, as well as manage the property and tenants for as long as you have the property


Sample BRRRR Deal

You can’t use hard money to purchase a rental property because of their short loan terms and high interest rates.

Conventional banks won’t loan on many fixer-upper properties because they’re not up to FHA standards. Banks also require tons of cash up front for a rental property.

So the solution? Use a little of both. Here’s what that looks like:

Purchase price of $180k + rehab & loan/closing costs of $100k = $280k in total costs.

You estimate the ARV to be $400k on the property and that you’ll be able to rent it out for $2,000 per month.

Once you finish your rehab, you are able to refinance your property with a conventional bank. Banks will often loan 80% of the property value, so $320k of the $400k valuation. That $320k pays off your $280k loan and you walk away with $40k in cash!

Now, let’s say that your mortgage is $1,600 per month, resulting in +$400 in cash flow each month.

In this situation, you get a check like you’ve completed a fix and flip, but then nice monthly cash flow on top and ownership of a property! That’s hard to beat.

Sample BRRRR Deal

How To Start Using The BRRRR Strategy

Secure Funding - Your first step is to ensure that you’ve got funding lined up for your deal. Just like finding a property you want to move into, no one will take you seriously if the funding isn’t there.

In this case, you’re going to want hard money. Make sure you do your research and look into a hard money lender’s:

- Speed to Closing – There’s nothing worse than waiting around so long that you miss your closing deadline.

- Support – Will they assign team members to work with you through the loan/rehab process?

- Credit & Money Down Requirements – Most hard money lenders require a minimum credit score and quite a bit of money down. The Investor's Edge doesn’t require either.

- Track Record of Success – Have they been around for awhile? What is their BBB rating? Have they funded other deals in your area?

Find and Market to Motivated Sellers - This is where 95% of real estate investors fail. What’s your plan to repeatedly find motivated sellers? 

The reality is that you’ll need to find hundreds, if not thousands, of properties that meet the criteria of a potential deal before you close one. If you don’t know how you’re going to do that, then this might not be for you.

With The Investor's Edge, our members get access to a proprietary deal finding software. It allows you to sort through 160 million properties throughout the U.S. and then market to them. Our members do not have problems with finding potential BRRR properties.

Determine Your Exit Strategy - Before you go ahead and get funding for your deal, you need to know what your exit strategy is on your hard money loan.

You need a conventional lender that is willing to refinance your hard money loan. Many lenders don’t do this, so make sure you’ve done your research beforehand so you’re not forced to flip your property at the end.

We can recommend lenders who are favorable to real estate investors getting into a BRRRR deal, but we can’t guarantee that they’ll refinance your loan.

How To Start Using The BRRRR Strategy

How We Can Help You With BRRRR Deals

100% Financing: 37% of our loans qualify for 100% financing, meaning that the borrower brought $0 to the closing table. 

Easier Loan Qualifications: We believe everyone deserves a chance at financial freedom, if they’re willing to work for it. That’s why we have no credit or experience requirements.

Deal Finding Software: Our Investor’s Edge software is the key to finding & marketing to motivated sellers repeatedly

Dedicated Loan Advisor: We Provide all borrowers with a single point of contact to help manage every step of the process

Dedicated Rehab Project Manager: You will have a former general contractor assigned to help you through the rehab process. They will work with your contractor to verify all pricing, and conduct a weekly

Recommend Refinance Lenders: While we can’t guarantee refinancing with another lender, we can show you the ones we’ve worked with in the past. Many lenders don’t like refinancing hard money loans or to work with first-time rental owners.

Training Program: Inside our Find-Fund-Flip System, our members get access to over 100 videos, five pieces of software, and numerous downloads such as contract templates and postcard designs. Everything you need is in here.

How We Can Help You With BRRRR Deals