BRRR (real estate)
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BRRR is a real estate investment strategy that stands for Buy, Renovate, Rent, Refinance. It is used by real estate investors who have experience renovating or rehabbing properties but who want to invest in rental property for consistent cash flow.
Some investors add an additional R that stands for Repeat as a way of building a real estate portfolio.
While the BRRR strategy is often used with single family rental (SFR) properties, it can also be used for multifamily units.
How BRRR Works
A real estate investor purchases an investment property with a depressed value because it needs repairs and/or cosmetic updates.
Real estate investors have a variety of strategies for finding BRRR properties. They include conventional strategies like checking MLS listings and other online sources as well as investor-specific strategies such as contacting homeowners who might consider selling by direct mail or knocking on doors or gathering leads through an investor website or by posting yard signs (sometimes called bandit signs) in areas where they would like to purchase property.
The investor updates the property. This includes needed structural repairs, including plumbing and electrical needs, to bring a house up to the current code. It often includes cosmetic updates such as new paint, flooring, tile, counter tops, and kitchen appliances. Veteran renovators may add a bathroom or bedroom to increase the value of a home.
The BRRR investor may do these updates on their own, or may choose to hire a contractor to coordinate the work.
This is where the BRRR strategy differs from typical house flipping. While flippers sell a renovated property in order to realize profit all at once, rental property owners choose to receive cash flow consistently over time. The real estate investor finds a tenant and becomes a landlord receiving rent, usually on a monthly basis.
This is a key part of the BRRR strategy. Most house flippers use a Fix and Flip loan with a 13-month term that covers the purchase and renovation costs. By refinancing, a real estate investor moves the property to a loan with a fully amortized 30-year loan.
As real estate investors gain experience, they may repeat the BRRR strategy in order to build a real estate portfolio by buying more rental properties.
- "How To Take Advantage Of The BRRRR Strategy". 2018-08-14. https://www.fortunebuilders.com/brrrr-strategy/.
- idealrei (2018-02-28). "Using BRRR Strategy to Build a Rental Property Empire" (in en-US). https://idealrei.com/blog/brrr-method-rental-property.
- "How to use the BRRRR Method to Buy Rentals" (in en-US). https://investfourmore.com/brrrr-method/.