Discover the five transformative stages of the BRRRR method designed to scale your real estate portfolio rapidly

This strategic framework guides investors through the process of buying, renovating, and refinancing properties to maximize long-term wealth. www.francoisentrepreneur.org

The entire success of the BRRRR strategy rests on step one: Buy. You are not looking for a move-in ready house; you are hunting for a distressed, undervalued property, a property where you can force massive appreciation through renovation.

• The Key to Buying Right: You need to calculate the After Repair Value (ARV). This is what the home will be worth after all the work is done.
• The 70% Rule: Many successful BRRRR investors live by the 70% Rule. This states that your maximum purchase price should be 70% of the ARV minus the estimated repair costs. This crucial buffer ensures you have enough equity built in immediately to cover all your costs and still have capital left over after the refinance. If you can’t make the math work here, you walk away. A great deal is bought, not found.

Step two is Rehab. This is where you transform the asset and drive up its value for the appraisal later on. But be strategic!

• Focus on Return On Investment: Don’t waste money on personalized features. Focus on repairs and upgrades that have the highest Return on Investment (ROI). Think modern kitchens, updated bathrooms, fresh paint, and high-quality, durable flooring. These improvements appeal to future appraisers and tenants.
• Speed is Money: Every day your property is under renovation is a day it’s not generating income. Create a tight budget and a swift timeline. You want to move quickly and efficiently from a distressed property to an attractive, stabilized asset.

Once the rehab is done, we move to step three: Rent. This step is critical because the bank won’t refinance a speculative property; they refinance an income-producing asset.

• Tenant Quality Matters: Secure high-quality tenants with strong lease agreements. The rental income not only provides cash flow but also proves to the lender that the property is a stable investment.
• Rent-Ready for the Lender: Lenders will often require the property to be occupied, or at least have executed leases, before they’ll approve the refinance. This is the market proof that your hard work and investment have paid off.

Step three: Refinance, The Capital Recycler

This is the BRRRR step that separates portfolio builders from one-off investors: Refinance. You’re getting a new, long-term loan based on the property’s new, higher After Repair Value.

• The Cash-Out Refi: You will pursue a cash-out refinance. The bank sends an appraiser who sees your beautifully renovated, tenant-occupied property and values it at the high After Repair Value you targeted. They will then lend you up to 75% or 80% of that new appraised value.
• Recycle Your Capital: The cash you receive from this loan is used to pay off the initial short-term financing you used to buy and rehab the property. If your numbers were calculated correctly with the 70% rule, you should receive enough cash back to recoup your initial down payment, rehab costs, and closing costs. You now own a cash-flowing asset, and your original cash is back in your pocket.

Think about that power for a moment. You started with a chunk of money, you applied the BRRRR process, and now you own a stabilized, income-producing asset, and you have your original money back. You didn’t lose any capital; you recycled it. That’s how you break free from the traditional saving-up-for-the-next-down-payment cycle. The BRRRR method is the blueprint for aggressive, strategic portfolio growth. To learn more, check out our book. Click this link below

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