The BRRRR Method: Robert Kiyosaki’s Secret To Building Wealth Through Real Estate
Written by
Jennifer Taylor
Edited by
Rebekah Evans
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Building long-term wealth through real estate investing isn’t easy, but that doesn’t mean there aren’t proven paths to success. One such path, created by Robert Kiyosaki, is the BRRRR method, which debuted in his book “Rich Dad Poor Dad” and has since become a blueprint for real estate investors.
An acronym for “buy, rehab, rent, refinance and repeat,” this approach guides investors to purchase low-priced properties in need of inexpensive upgrades and rent them out. It’s not a get-rich-quick scheme, though. Instead, it slowly creates a flow of passive income and builds equity that can potentially become a sizable real estate portfolio of rental homes.
If this sounds like something up your alley and you want to learn more about the BRRRR strategy, check out these steps to get you started.
Step 1: Buy
Obviously, to get the process of investing in real estate started, you need to buy a property. This shouldn’t be something completely turnkey, as you’re looking to get a discount. Buying a slight fixer-upper can help you attain lower mortgage payments, interest rates and closing costs.
Set your sights on properties like a foreclosure, slightly distressed homes or even a place that just needs a few upgrades. As long as the potential is there and the improvements needed fit your budget, you’re likely in a great position to buy.
Step 2: Rehab
After you’ve purchased the property, it’s time to get to work. Exactly what that will entail in the short term will vary by property — i.e., updating the kitchen and bathrooms, removing old carpet, installing new windows, purchasing new appliances and upgrading the landscaping.
Before starting renovations, make sure the money you’re putting into this house will be a good return on investment. For example, adding a pool to a home in a non-tropical climate might not increase your property value, but finishing a basement could.
Step 3: Rent
After your rental property is upgraded, it’s time to list it. This means you’ll need to decide how much you want to charge per month in rent, which should be based on several factors.
To get to this number, analyze the monthly rates of similar rentals in the area, factor in any recent market changes and consider maintenance and repair costs. You should also consider how tenants will pay their rent — i.e., through a property manager, by check or electronically.
There are also many factors to consider when choosing tenants. For example, you might require applicants to meet a certain income threshold, submit a credit report and provide references.
Step 4: Refinance
Finally, you’ll want to refinance the property. Since you worked hard to increase the value of the home, you should be able to use that as collateral on your new loan.
This means you will likely be able to recoup your initial investment and possibly even additional equity. This should feel satisfying, after all the hard work you put into the process.
Step 5: Repeat
After buying the house, renovating it, renting it out and refinancing it, your work is done, with or without cashing out refinances. With the cash back in your pocket, you’ll have the financial freedom to start the process all over again — if you so desire.
Final Take To GO: BRRRRing Home the Bacon
Real estate has been a proven money-maker with it comes to alternative investments. This doesn’t mean it’s an easy undertaking though, as it will require a lot of upfront funding and a good amount of elbow grease to build your wealth. With that said, following Kiyosaki’s guidance could turn your fortune around.
Caitlyn Moorhead contributed to the reporting for this article.
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