Free BRRRR Method Flowchart

Download REI Grove's BRRRR flowchart to understand the buy, rehab, rent, refinance, and repeat process for rental property investing.

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Key Takeaways

BRRRR stands for buy, rehab, rent, refinance, and repeat.
REI Grove's BRRRR flowchart walks investors through buying below market value, completing high-ROI repairs, renting the property, refinancing, and reinvesting capital.
BRRRR investors need to review ARV, rehab costs, rental income, and refinance assumptions before buying.
A strong BRRRR deal should leave enough equity and cash flow to support the next investment.

How to Analyze a BRRRR Deal

If you spend a lot of time reading about real estate online, you have probably run into the acronym 'BRRRR' before. What does BRRRR mean?

BRRRR is a popular real estate investment strategy that involves capitalizing on forced appreciation and cash-out refinancing to fund continuous real estate investment in rental properties. The acronym "BRRRR" stands for buy, rehab, rent, refinance, and repeat.

BRRRR Flowchart at a Glance

Flowchart Step	What It Covers	Why It Matters
Step 1: Buy	Purchase an investment property under market value using cash, seller financing, a hard money loan, or another financing method.	Creates room for forced appreciation after rehab.
Step 2: Rehab	Complete livability repairs first, then choose high-ROI renovations.	Adds value before renting and refinancing.
Step 3: Rent	Market the property, screen tenants, set rent, and start collecting rental income.	Turns the rehabbed property into an income-producing rental.
Step 4: Refinance	Request an appraisal and pursue a cash-out refinance after the property value increases.	Allows the investor to recover capital and improve financing terms.
Step 5: Repeat	Use income and refinance proceeds to invest in another property.	Supports portfolio growth through repeated BRRRR deals.

What is the BRRRR Method?

The BRRRR method combines house flipping and traditional buy-and-hold investing.

Like flippers, BRRRR investors buy properties with the intention of adding value and forcing appreciation through renovations. However, rather than selling the property afterwards, BRRRR investors find tenants and rent out the property long-term, like buy-and-hold investors.

After the investor establishes tenancy, the investor can order a new appraisal and refinance the loan to reflect the post-renovation increase in property value. With cash-out refinancing, the investor can draw on the increased equity, take out a larger loan, and receive the difference as a lump-sum payment.

These funds represent the goal of a BRRRR investment. The investor can reinvest them in the next BRRRR property and repeat the process. Over time, this final step can help investors build passive income and repeat their success.

Benefits of BRRRR

Now that we know that does BRRRR mean, what are the benefits of the method?

BRRRR has several benefits over more traditional methods of real estate investing. BRRRR allows investors to use existing equity to roll over funds continuously without taking out additional loans for capital. BRRRR investors also receive steady income from tenant rent payments, which can fund the mortgage.

Despite some upfront costs, BRRRR investors often focus on undervalued or distressed properties. These properties may involve lower competition, thus many BRRRR investors find the strategy a more approachable path for beginners who want to enter real estate investing.

When BRRRR Can Go Wrong

The BRRRR strategy has two major pitfalls. By understanding them ahead of time, you can avoid making these classic mistakes.

First, an important component of BRRRR investing is that you must buy the property at under market value. In practice, this means the property is often a distressed or run-down home. This creates enough opportunity to add value and secure a higher appraisal after renovations.

Second, you should never invest more than 75% of the property's after-repair value, or ARV. This rule helps investors avoid depleting their capital and supports the BRRRR investing cycle.

An easy way to ensure you adhere to this rule is by using an ARV calculator to estimate the future value of the property after renovation and keep the numbers within that 75% margin.

What Does the BRRRR Flowchart Cover?

REI Grove's BRRRR flowchart gives investors a visual overview of the BRRRR process. It explains how investors move from purchase and rehab to rental income, refinance, and reinvestment.

This flowchart includes:

Buying an investment property
Using cash, seller financing, hard money loans, or another financing method
Buying under market value
Staying under 75% of ARV
Completing livability repairs
And much more!

Step 1: Buy

The first BRRRR step involves buying an investment property, ideally under market value. Investors may use a hard money loan, seller financing, cash, or another financing method.

The goal at this stage is to buy a property with enough room for value growth after repairs. Investors should review the property's current value, estimated ARV, repair needs, neighborhood, rental demand, and financing costs before moving forward.

Step 2: Rehab

After buying the property, the investor rehabs it. The flowchart recommends that investors prioritize repairs that make the home livable and functional first, such as plumbing and electrical work.

After completing essential repairs, investors can choose high-ROI rehabs that add more value than they cost. These may include:

New roofing
Refinished hardwood
Kitchen remodels
Bathroom remodels
And more!

The rehab stage plays a major role in forced appreciation. Strong rehab choices can raise the property's value and improve refinance results later.

Step 3: Rent

After the rehab, the investor rents out the property and starts generating rental income. This step requires strong listings, online marketing, tenant screening, and a rent price that supports cash flow.

Investors should create engaging listings, post them online, and screen applicants thoroughly. A good tenant can help protect rental income and reduce turnover risk.

Step 4: Refinance

After the investor rents the property, the refinance stage begins. You can request an appraisal to confirm that the property value increased because of the rehab work. Then, you can take the higher appraisal to the bank and request a cash-out refinance.

A cash-out refinance allows you to tap into home equity and secure a new loan. If the deal works well, you can recover part or all of the original capital and keep the property as a rental.

Before refinancing, investors should review:

New appraised value
Loan balance
Refinance terms
Interest rates

Step 5: Repeat

The final step involves repeating the process. The investor continues collecting income from the property until enough capital exists to invest in another property.

A successful BRRRR deal can create a cycle: buy below market value, force appreciation, rent the property, refinance, recover capital, and repeat with the next deal. Over time, investors can use this strategy to grow a rental portfolio.

Analyzing a BRRRR Deal

Before you purchase a property intended for the BRRRR method, you need to make sure that the deal adds up financially. This is the purpose of doing a BRRRR analysis using a tool like a BRRRR spreadsheet. By analyzing a BRRRR deal, you can ensure that you're buying a property in the right price range to reach the minimum ARV you need to make a profit.

Although it's always useful to enlist help from more experienced real estate experts or BRRRR investors when analyzing a deal, you can do this analysis on your own. You'll need information about the property and its expenses, your planned rehabs and renovations, and how much rent you can expect after you complete the rehabs.

Ultimately, you'll want to know a few key figures. You'll want an idea of your net operating income, which equals your rental income minus operating expenses. This shows the cash you keep after regular monthly expenses.

You'll also want to know your annual cash flow, which subtracts your mortgage payments, and your cash-on-cash rate of return, which measures your cash flow relative to the cash you initially invested on a pre-tax basis.

These same metrics matter when you complete the refinance portion of the BRRRR method. Your cash-on-cash rate of return may increase if you secure a lower mortgage payment after refinancing your loan. You'll want to know your cash flow before and after the refinance so you can plan capital expenditures and other investments properly.

Taking Next Steps

The above metrics won't necessarily tell you whether your planned BRRRR deal will succeed. However, they will give you a set of baseline expectations and a clear picture of which factors most affect your desired cash flow and rate of return.

You can use this information to decide which property will make the best BRRRR deal among several options or to strategize with an in-progress BRRRR deal. And if your deal doesn't work the way you'd like, you can adjust various expenses, such as repairs, rent, property management fees, or other assumptions, to learn what it would take to make the deal work.

How Can a BRRRR Flowchart Benefit Investors?

A BRRRR flowchart gives investors a clear visual overview of the strategy. Instead of viewing BRRRR as one large project, investors can follow the process one stage at a time: buy, rehab, rent, refinance, and repeat.

This can help you understand where a deal may succeed or fail. For example, a property may look promising at purchase but fail after rehab costs, rent estimates, or refinance terms enter the analysis. The flowchart gives investors a simple framework for reviewing each stage before committing capital.

Conclusion

It's important to think critically about any deal before making a property investment, and BRRRR is no different. Every BRRRR investment should start with a detailed analysis and deal breakdown, potentially including a BRRRR method example or case study so that you fully understand the process.

You can download a copy of REI Grove's BRRRR flowchart below to visualize the buy, rehab, rent, refinance, and repeat process before analyzing your next deal.

Download the Flowchart

FAQs

What does BRRRR mean?

BRRRR is a real estate investing strategy. The acronym stands for buy, rehab, rent, refinance, and repeat.

How does the BRRRR method work?

The BRRRR method works by buying a property, improving it, renting it, refinancing based on the higher value, and using recovered capital for another property.

Is BRRRR good for beginners?

BRRRR can be a great strategy for beginner investors, but new investors need to understand financing, rehab costs, ARV, tenant screening, cash flow, and refinance risk.

What is ARV in real estate?

ARV, or after-repair value, refers to the estimated value of a property after renovations.

What is cash-out refinancing?

Cash-out refinancing allows an investor to replace an existing loan with a larger loan and receive part of the equity as cash.

How much should I spend on a BRRRR property?

Many BRRRR investors try to keep total investment below 75% of the property's ARV, but each deal requires its own analysis.

BRRRR Method Flowchart

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