The BRRRR Strategy Explained
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It is a strategy that allows investors to build a large portfolio of rental properties without needing to save up a new 20% down payment for every single house.
Understanding the Numbers
- Purchase Price & Rehab: You typically buy a distressed property with cash, private money, or a hard money loan.
- ARV (After Repair Value): This is crucial. You force appreciation by improving the property. Your new loan will be based on this higher value.
- Refinance LTV (Loan-to-Value): Most commercial lenders will give you a new loan for 75% of the appraised ARV.
The Goal: "Infinite Returns"
If you can refinance for more than your total cost (Purchase + Rehab), you have achieved a "perfect BRRRR." You have $0 left in the deal (or even cash in your pocket), yet you still own the cash-flowing asset. When your own money in the deal is zero, your Return on Investment is technically infinite.
Risk Factor
The biggest risk in BRRRR is the appraisal. If the appraiser's value comes in lower than expected, you may be forced to leave more cash in the deal than you planned.