Understanding the BRRRR Method: A Step-by-Step Guide for Real Estate Investors

monkeybusinessimages / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

If you’re looking for a way to build wealth through real estate without running out of cash, the BRRRR method might be the strategy you’ve been searching for. This repeatable investing approach allows you to recycle your capital, grow your portfolio and generate passive income over time — all while minimizing your upfront cash requirements.

But what exactly does BRRRR mean, and how can you use it successfully?

In this guide, we’ll break down the BRRRR strategy step-by-step, explain how each phase works and share expert tips to help you get started with confidence.

What Is the BRRRR Method?

The BRRRR method stands for:

Buy, Rehab, Rent, Refinance, Repeat.

It’s a popular real estate investing strategy used to build long-term wealth by purchasing undervalued properties, fixing them up, renting them out, refinancing to recover your investment and repeating the process with a new property.

Originally popularized by investors through BiggerPockets, the BRRRR strategy has gained traction as a more efficient way to scale a rental portfolio compared to traditional buy-and-hold methods.

Step 1: Buy

The first step in the BRRRR method is finding and purchasing a property with value-add potential.

What to Look For:

• Distressed or undervalued homes
• Foreclosures or short sales
• Motivated sellers or off-market deals

The goal is to buy below market value so you can add equity through renovations later.

Key Tips:

• Focus on location — even a great rehab won’t fix a bad neighborhood.
• Run the numbers carefully using a tool like the 70% rule. Aim to pay no more than 70% of the ARV (after-repair value) minus repair costs.
• Don’t forget to estimate repair costs upfront and factor in a buffer for surprises.

Step 2: Rehab

Rehab is where you add value by renovating the property. The better the rehab, the more equity you build and the more rent you can command.

Plan and Budget Wisely:

• Prioritize updates that boost property value: kitchens, bathrooms, curb appeal
• Stay within budget and avoid over-improving for the neighborhood
• Use a detailed scope of work to manage contractors

DIY vs. Hiring Contractors:

• For small cosmetic fixes, DIY can save money — but know your limits
• For structural or system upgrades like HVAC and plumbing, hire licensed pros to ensure compliance

A well-managed rehab can increase a property’s value by 20% to 30%, depending on the market and scope of improvements.

Step 3: Rent

Once your property is in rent-ready condition, it’s time to bring in tenants and start generating income.

Prep the Property:

• Install appliances, smoke detectors and do a deep clean
• Take professional photos for listings

Set a Competitive Rent:

• Research local rental comps
• Use tools like GOBankingRate’s housing price calculator

Choose Great Tenants:

• Screen applicants with credit checks, background checks and references
• Use a solid lease agreement and clear communication

A good tenant can help you earn consistent rental income — an essential piece of the BRRRR strategy.

Step 4: Refinance

This is where the BRRRR method truly shines. After renting the property, you’ll refinance it — ideally with a cash-out refinance — to pull out most or all of your original investment.

Here’s How It Works:

• Get the property appraised based on its current post-renovation value
• If the numbers work, the bank will refinance the property at the new value and give you cash back
• You use this cash to fund your next BRRRR deal

What You Need to Know:

• Lenders usually want 6 to 12 months of ownership or rental history
• A higher credit score and a low debt-to-income ratio help with approval
• Not all banks offer cash-out refis on investment properties, so shop around

If done right, refinancing can return 80% to 100% of your capital, letting you reinvest without adding new funds.

Step 5: Repeat

Now that you’ve pulled out your cash, you’re ready to repeat the process.

How to Scale Your Portfolio:

• Use the same capital to buy another property
• Look for ways to streamline your communications with contractors, lenders and property managers
• Consider expanding into other neighborhoods or property types, e.g., duplexes or small multifamily

The BRRRR strategy is powerful because it’s repeatable, turning one down payment into multiple long-term income-producing assets.

Pros and Cons of the BRRRR Strategy

Benefits

• Recycle your capital: One-time investment fuels multiple properties
• Build equity and cash flow faster than traditional methods
• Gain experience across all aspects of real estate investing

Challenges

• Upfront costs for repairs, closing and carrying the property
• Refinancing hurdles like strict lender requirements or lower appraisals
• Active management: This isn’t a hands-off strategy, especially early on

Tips for Success With the BRRRR Method

To make the most of the BRRRR strategy, keep these best practices in mind:

• Do your market research: Know the ARV, rental demand, and local regulations
• Build a reliable team: Include a real estate agent, lender, contractor and property manager
• Stay financially flexible: Have reserves for repairs and vacancies
• Track every dollar: BRRRR relies on precise budgeting and forecasting

Final Take to GO: Is the BRRRR Method Right for You?

The BRRRR method can be a powerful tool for real estate investors who want to build long-term wealth and passive income. It’s ideal for those who are hands-on, numbers-savvy and willing to put in the work upfront.

By understanding the BRRRR meaning and following the strategy step-by-step, you can scale your investment portfolio while using the same pool of capital again and again.

Ready to take the next step? Check out GOBankingRate’s breakdown of 10 cities where home values are rising and why real estate is a good investment.

Data is accurate as of July 30, 2025, and is subject to change.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

Share This Article: