BRRRR method: How it works and tips for success

Real estate investing can feel overwhelming, especially when you're trying to build a portfolio on a budget. The BRRRR method offers a smart solution that lets you recycle your initial investment repeatedly, allowing you to create a systematic approach to building wealth through rental properties.

BRRRR is a proven investment strategy that transforms undervalued properties into income-generating assets while preserving your capital for future deals. By following this methodical approach, investors can scale their portfolios faster than traditional buy-and-hold strategies.

What’s the BRRRR method in real estate?

The BRRRR method is a real estate investment strategy that allows you to build wealth by purchasing undervalued properties, improving them, and using the increased value to fund your next investment. This approach recycles your initial capital to acquire multiple assets.

Here’s what BRRRR stands for: 

— Buy

— Rehab

— Rent

— Refinance

— Repeat

This process helps investors maximize their return on investment while building a portfolio of cash-flowing rental properties. It works best in undervalued markets with strong rental demand.

How does the BRRRR method work?

The BRRRR real estate strategy follows five distinct phases that create a repeatable investment cycle. Each step builds on the previous one, ultimately allowing you to recover most or all of your initial investment.

Buy

The first step involves finding and purchasing undervalued properties with strong rental potential. Successful investors typically look for properties priced 20–30% below market value that may need cosmetic or minor structural improvements. You'll need cash or short-term financing for this initial purchase, as traditional mortgages can slow down the process when competing with other buyers.

Focus on neighborhoods with good rental demand, decent schools, and signs of economic stability. Properties in emerging areas or those experiencing short-term market setbacks often present the best opportunities for value creation.

Rehab

Renovation turns your undervalued property into one that earns higher rental income and achieves a better appraisal value. Focus on improvements that add the most value relative to cost, such as updated kitchens, bathrooms, flooring, and fresh paint. Consider hiring experienced contractors who can work quickly while maintaining high quality.

Budget carefully during this phase and build in a 10–20% contingency for unexpected issues — many properties due for a rehab have hidden surprises. 

Rent

Renting isn’t just about recouping some of your upfront costs — it demonstrates the property's value. Once renovations are complete, you'll market the property to qualified tenants who can cover your expenses and provide positive cash flow. Screen tenants to minimize vacancy and ensure you’ll receive rent payments on time. 

Set competitive rents based on similar properties in your area, but factor in your improvements. A well-renovated property can attract premium rents that cover your investment. You can also offer slightly longer lease terms to reduce turnover and maintain steady income.

Refinance

At this stage, you can withdraw most of your invested capital through a cash-out refinance based on the property's new, higher value. Lenders will order a new appraisal reflecting the improvements you've made. If you've done everything correctly, the refinanced loan amount should cover 70–80% of your investment.

Better offers an excellent cash-out refinance option to implement the BRRRR method. Our digital platform streamlines the application process, making it faster and more straightforward than with traditional lenders. You can complete our entire process online, getting you to the closing stage quicker.

...in as little as 3 minutes – no credit impact

Repeat

With most of your capital recovered through refinancing, you can repeat the entire process on another property. Each cycle adds a cash-flowing asset to your portfolio. The key is maintaining enough cash reserves for down payments and unexpected expenses as you scale.

After this process, your BRRRR property will generate monthly income while requiring minimal additional capital from you, and can become the foundation of a growing real estate portfolio.

Pros and cons of the BRRRR method

Like any investment strategy, the BRRRR approach has advantages and potential drawbacks that investors should carefully consider.

Pros of the BRRRR method might include:

— Accelerated portfolio growth: You can acquire multiple properties using the same initial capital, building wealth faster than traditional buy-and-hold investing.

— Passive income generation: BRRRR properties provide monthly cash flow that can supplement your regular income or fund additional investments once stabilized.

— Forced appreciation: Strategic improvements can give you instant equity instead of waiting for market appreciation.

— Tax advantages: Rental properties offer numerous deductions, including depreciation, repairs, and interest payments that can reduce your overall tax burden.

Cons of the BRRRR method might include:

— Large upfront investment: You need a lot of cash for down payments, renovations, and carrying costs before refinancing recovers your investment.

— Construction and renovation risks: Projects can go over budget or take longer than expected, eating into your profits and tying up capital.

— Market reliance: The strategy works best in appreciating markets with strong rental demand. Economic downturns can impact both property values and rental income.

— Time-intensive management: Managing multiple properties requires more time and attention for tenant relations, maintenance, and financial tracking than other, simpler investments.

Example of the BRRRR method

Here's a scenario of how the BRRRR method might work. 

Imagine you find a three-bedroom house in a good neighborhood listed for $250,000 that needs $25,000 in renovations. Comparable updated homes in the area sell for $340,000 and rent for $2,400 monthly.

You purchase the property with $150,000 down and a $100,000 loan, then invest $25,000 in improvements, including new flooring, an updated kitchen and bathroom, fresh paint, and landscaping. Your total investment is $175,000 plus closing costs.

After completing the work, you rent the property for $2,400 per month to qualified tenants with good credit and stable employment. The rental income covers your loan payments, insurance and taxes.

Six months later, you refinance based on the new appraised value of $340,000. A cash-out refinance at 75% loan-to-value gives you $255,000, which pays off your original $100,000 loan and returns $155,000 of your invested capital. You now own a property worth $340,000 with a $255,000 mortgage, giving you $85,000 in equity plus the recovered cash to invest in your next property.

6 tips for a successful BRRRR

Implementing the BRRRR method successfully requires careful planning and execution across all five phases. Use these strategies to maximize your chance of success.

1. Find the right financing

Secure flexible financing options before you start looking for properties. Hard money lenders, private investors, or portfolio strategists often work better than traditional banks for the initial purchase and renovation phases because they can close quickly when you find the right deal.

Build relationships with multiple lenders so you have options when opportunities arise. Compare rates and terms to find the best fit for each deal. Some lenders specialize in investor-friendly loans that make the BRRRR process smoother.

2. Choose the right property

Focus on properties in neighborhoods where you understand the market dynamics. Look for homes that need cosmetic updates rather than major structural work, which carries more risk. 

Run detailed financial projections before making offers. Calculate potential rental income, renovation costs, and refinance amounts, and build in conservative assumptions and safety margins to protect against unexpected issues that may arise.

3. Build a network

Develop relationships with contractors, property managers, real estate agents, and other investors who can support your BRRRR investment. Reliable contractors who understand your standards and timeline are particularly valuable, as renovation delays can impact your returns.

Connect with other investors through local real estate investment groups or online forums. Experienced investors can provide market insights, refer service providers, and sometimes partner on larger deals.

4. Manage cash flow

Maintain cash reserves for unexpected expenses and opportunities that require quick action. The BRRRR method involves cash outflows before refinancing recovers your investment, and good cash management can prevent you from getting stuck mid-project. Track all expenses carefully and build systems for managing multiple properties efficiently as your portfolio grows. 

5. Focus on value creation

Concentrate your renovation efforts on improvements that tenants value and lenders recognize during appraisal. Kitchens, bathrooms, flooring, and curb appeal usually provide the best returns. 

Research comparable sales and rental rates thoroughly before starting renovations. Understanding what drives value in your target market helps you make smart improvement decisions that maximize your refinance proceeds.

6. Plan your exit strategy

Consider your long-term goals for each property before starting the BRRRR process. Some investors hold properties indefinitely for passive income, while others eventually sell to profit from appreciation. Having a clear strategy helps guide renovation decisions and financing choices.

Make BRRRR work for you with Better

The BRRRR method offers real estate investors a powerful wealth-building strategy through strategic property acquisition and improvement. By systematically buying undervalued properties, renovating them thoughtfully, securing reliable tenants, and refinancing to recover capital, you can scale your portfolio faster than traditional approaches.

When you're ready to refinance and recover your invested capital, Better offers fast cash-out refinancing options that streamline the BRRRR method. Our digital application process moves faster than traditional lenders, helping you complete the refinancing phase quickly so you can move on to your next investment opportunity. 

Better's transparent fee structure also makes financial projections more accurate from the start, so you can confidently plan your BRRRR deals, knowing exactly what your refinancing costs will be. With the right financing partner, you can focus on finding great deals instead of getting stuck in paperwork.

...in as little as 3 minutes – no credit impact