Real Estate Investing Basics

Before Hopping on the BRRRR Bandwagon, Consider This

Expertise: Personal Finance, Personal Development, Real Estate Investing Basics, Landlording & Rental Properties
58 Articles Written
paying-off-mortgage

If I had to guess what BiggerPockets' "buzzword" of the year was in 2019, it would be BRRRR. For those who do not know, BRRRR is an acronym for buy, rehab, rent, refinance, repeat—a strategy that has been executed for decades.

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The idea is that you BUY a house that needs work, you REHAB that house to add value, you RENT the house out to tenants, and you REFINANCE the house to pull all or some of your initial investment back out. Then, you REPEAT the process by using the money you pulled out to purchase the next property.

David Greene, co-host of the BiggerPockets Podcast, wrote a bestselling book on this strategy, where he clearly articulates everything you need to know.

However, Warren Buffett always says, “Be fearful when others are greedy and greedy when others are fearful.”

In this context, it seems that everyone and their mother wants to do a BRRRR deal. It's a sexy term, and it undeniably seems like a great way to gain both cash flow and equity.

But now I am a bit afraid of it.

I, myself, was planning on foraying into BRRRR territory this year in North Carolina. In fact, I wanted to do multiple BRRRRs. But after traveling there and talking with lenders, I realized that, given my goals of increasing passive income rapidly, BRRRRing with my own money made little sense.

In this article, I am going to explain the downsides of BRRRR investing compared to traditional rental property investing and how it could prove to be headwind rather than a tailwind for you.

Looking for the secret to creating wealth in real estate? The BRRRR method—or “buy, rehab, rent, refinance, repeat”—is our proven, easy-to-follow method to build your portfolio. When you buy a home, fix it up, improve its value, and then refinance, you’re borrowing against the value of the property at its highest. Done correctly, this allows you to recover more of—or sometimes all of—the money you invested in the property. Our guide to the BRRRR method explains each of the steps and outlines how to build wealth through real estate, one property at a time.

What Is Your Goal?

In any highly debated topic on BiggerPockets, the truth is almost always “it depends.” What does it depend on? Ninety-nine percent of the time, it is the person’s goals.

There is no difference here.

Who This Article Is NOT For

If your goal is to increase your net worth rapidly over multiple years, the BRRRR strategy is one of the best. This article does not pertain to you.

If your goal is to use expensive money (hard or private) to get the deal and complete the rehab and then to refinance at a lower rate later, this article is not for you.

Keep doing what you’re doing!

Related: 3 House Hacks in 3 Years & Now I’m Financially Free—Here’s Exactly How I Did It

Who This Article IS For

If your goal is to become financially independent as fast as possible through passive cash flow earned through real estate investing with your own money, please continue reading. I'll show you why BRRRRing is NOT the best strategy for your goals.

If it’s not BRRRR, do you know what the best strategy is?

Believe it or not, I am not going to say house hacking (although house hacking is a subset of this category).

If you guess good old fashioned rental property investing, that’s right! Find a property that you can purchase with 5 to 25 percent down and that you can immediately place a tenant in to start generating passive income.

Let me explain further.

Why Not BRRRR?

What draws people the most to BRRRRing is the fact that it is the best of both worlds. You can force appreciation through a rehab, cash flow through renting it out, and then pull some or all of your money out. Again, this works great for someone looking to build their net worth quickly but their cash flow less quickly.

Here are a few reasons why:

  1. After you get a tenant, you need to wait for a six-month seasoning period.

I have talked to my fair share of lenders about how quickly I can refinance after a tenant is obtained. Every single one of them says six months. I ask them if there is any way to decrease that seasoning period. Everyone says no.

Now, if you can find a lender with inexpensive rates who will have less of a seasoning period, or all they need is a signed lease, that would be great. Please let me know if you find one. I never have.

With this six-month seasoning period, your money is now tied up for—you guessed it—at least six months! In fact, it is likely going to be more than that because it is six months AFTER the tenant moves in. When you include time for the rehab, we are now talking nine to twelve months.

If you have $100,000 to invest in a BRRRR deal, you will not be able to recycle that money for at least six to 12 months. So, in one year’s time, the maximum amount of properties you could obtain is two.

With traditional rental property investing, if you have that same $100,000, you will be able to buy five properties with 20 percent down immediately.

Whose portfolio will cash flow more? One with five properties or one with two?

single-family-home

  1. It is very rare that you pull out ALL of your money.

What makes a BRRRR deal so powerful is that you are able to pull your money out and recycle it over and over again. In a perfect world, on every BRRRR deal you do, you will be able to pull out all of your money. Unfortunately, we do not live in a perfect world. It’s far from it.

Pulling all of your money out on a BRRRR is a home run of a deal. You can’t reasonably expect every deal you do to be a home run.

In most cases, after that six-month seasoning period, you will likely leave $5,000 to $10,000 in the deal.

Not bad… but you still have to wait six months for it.

With traditional rental properties, you will need to save up that 20 to 25 percent down payment. This may be more difficult for you depending on the market you are in (high down payments) or because of the amount of liquid capital you have (low savings rate).

Related: 3 Steps to Financial Freedom in 10 Years or Less

Judge this difficulty versus the difficulty and timing of a BRRRR deal.

If there are ways you can make more and spend less money, do it! Then, invest that difference into traditional rental properties.

  1. You will have to manage a rehab.

The third downside to a BRRRR is that you need to manage a rehab. You hear time and time again that contractors are the hardest people to work with in this business. Finding them is tough, and good ones are like gold.

As a new investor, what makes you think you will find a great contractor?

And put yourself in the contractor’s shoes. Who would you rather work for? A seasoned investor who knows exactly what they are doing and has a seemingly unlimited amount of money and tasks for you? Or a new investor who is going to ask a whole bunch of questions and maybe do a deal or two each year?

I am not saying it is impossible to have a good contractor, I am just saying it is unlikely—especially when you are first starting out. And you will need to manage this entire process, which is a lot of work.

With a traditional rental property that is ready to go, there might be some minor improvements to do. You'll have a handyman go in and knock 'em out in one day. Then, you'll turn the unit over to a property manager, get a tenant in there, and start cash flowing with little worry from practically day one.

Conclusion

The point here is that, to be the most successful you can be, you need to take all of the knowledge you acquire here on BiggerPockets and other places, synthesize it, and figure out what is most advantageous for you. Just because it seems like everyone is trying to BRRRR doesn’t mean that is what is best for you.

I encourage every single one of you to evaluate your goals in order to find out what it is that will allow you attain them the fastest with least amount of stress.

Is your goal to systematically add the most to your net worth and obtain cash flowing properties? Or are you trying to obtain deals with hard or private money, just to refinance them out after the seasoning period for cheaper debt? If so, then the BRRRR is the right strategy for you.

Are you are looking to attain financial independence as quickly as possible through cash flowing rental properties? If this is the case, stop blindly following the crowd and do the unsexy thing: good ole fashioned traditional rental property investing.

Do you agree or disagree with my assessment?

Let me know below with a comment!

Craig Curelop, aka thefiguy, is the author of The House Hacking Strategy and a driven pursuer of financial independence. Sta...
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    Tom Phelan Real Estate Investor from Key West, FL
    Replied 9 months ago
    You wisely stat: "I encourage every single one of you to evaluate your goals in order to find out what it is that will allow you attain them the fastest with least amount of stress." Evaluating your goals each year should necessarily include your Company 401(k), IRA, Life Insurance and Investment real estate. I commonly run into people who boast of a rental property with ROE of 4% when it's actually 2.6%. Original Purchase Price $210,000 Current rent monthly $1,200 monthly Current rent annually $14,400 monthly Current FMV $320,000 Annual Expenses $ 6,000 (No Mortgage) (No Property Management) NOI $ 8,440 Perceived ROE 4% ($8,440/$210,000) ($210,000) Actual ROE 2.64% ($8,440/$320,000) ($320,000 FMV) This investor could quite conservatively 1031 Exchange into a single property for $600,000 with 50% Down, or even three $325,000 SFH with $100,000 down on each resulting in ... 1. $975,000 combined Annual Appreciation 2. $975,000 (less land value) combined Annual Depreciation 3. Increased Mortgage Reduction 4. Three times the Rental Income (yes, expenses go up as well) Makes you think about it.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks, Tom! Great contribution here. I agree that one needs to take into account all investment possibilities.
    Barry H. Investor from Scottsdale, AZ
    Replied 9 months ago
    CRAIG - this is a great concise article which, in my opinion, is excellent for someone looking to just start out OR to add to a cash flowing portfolio (large or small). I especially agree with your #1 and #3 points. I am a full remodel investor in KANSAS CITY and I completely remodel, put in a solid tenant at above market rates (due to quality of remodel) and like you state in Point#1, my Buyer/Borrowers like to see 6 months of tenancy before they purchase a home from me with my seller-financing for 20-25% down. As for Point #3, yes - I spent 3 years going through the nightmares of unsavory contractors and real estate agents and lost a LOT of hard-earned $$$ before fine-tuning the machine to create a near perfect tenant-occupied turn key remodel for which I can pass on my experience, value and savings to an investor who can earn north of 20% annually even with loan costs/repairs/PM fees/insurance/taxes.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks, Barry! Wish you were in Denver. Glad you liked the article and agree.
    Dave Rav from Summerville, SC
    Replied 9 months ago
    I've always been worried about doing BRRRR in the last few years. I've only done one of these - back in 2013. I ended up getting about 95% of my money out (Cash out Refi). However, there are no guarantees the bank will do a cash out Refi. Commonly, they are much more picky (to say it nicely!) when you throw in the "cash out" part. Plus, they tend to drop their LTV. In other words, a traditional refinance may be allowed up to 75% of value, but a CO refi may be capped at 60%
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Interesting point here, Dave. Lesson learned here is to maybe be hesitant in using "Cash out" with lenders?
    Kevin Moules Rental Property Investor from Turlock, CA
    Replied 9 months ago
    I just did my first BRRRR deal this last year. Left about 10K in the deal. However all lenders I talked to allowed refi up to 75% ARV. May want to look around, 60% is really low from what I have seen.
    Lynda Agresti
    Replied 9 months ago
    This sounds right to me. Some people try to glamorize BRRR. Not good. We all need the truth and the facts. Thank you for your input.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks, Lynda!
    David Roberts from Brownstown, Michigan
    Replied 9 months ago
    It seems like owning equity at the top of market is the worst time to have cash trapped (equity).
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hard to argue with that. Though, if you pull it out and the market crashes, you might be under water on your property.
    Chuck Moreno New to Real Estate from San Antonio, TX
    Replied 5 months ago
    Not really a problem if you have a renter in covering the mortgage I would imagine. Great Article btw.
    Frankie Woods Investor from Albuquerque, NM
    Replied 9 months ago
    Why can't you put 20% down on 5 properties, complete the rehab to force appreciation, and pull out that 20% or more? BRRRR doesn't necessarily mean you have to pay 100% up-front. You can be creative with the Buy portion. Nevertheless, good article overall. As you stated, it's all about your individual goals.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Good point here, Frankie. However, you would need much more than that $100k to do this deal. You'll likely need at least another $100k if you assume $20k of rehab for each property.
    David Roberts from Brownstown, Michigan
    Replied 9 months ago
    That would still likely be a homerun you would need. Noe you have 2 sets of closing costs as well. Usually the most instant equity is from heavily distressed sales that cant pass for conventional financing.
    Hayden W Gibson New to Real Estate from Rocklin, CA
    Replied 9 months ago
    Great read! As a new investor there are quite a few takeaways from this post. For a newbie, managing a rehab seems like it adds a lot of time and risk to an already intimidating process. Great point about accessing your capital and it does seem like it could be a way of getting your money trapped at the top of the market.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks, Hayden!
    Christopher Stacy Rental Property Investor from Wiesbaden Germany
    Replied 9 months ago
    Great point about the seasoning requirements. I have been considering a BRRRR and this shines a different light on the process that most people fail to mention. Thanks!
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks Christopher! Yes - something definitely to be mindful of.
    Drake Johnson
    Replied 9 months ago
    If you are able to use cash, look into delayed financing. No seasoning periods.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Delayed financing is definitely a thing! Only problem there is that it is nearly impossible to pull all of your money out. Even with that delayed financing option, it'll take you at least 12 months to complete 5 of those.
    Clint G. Rental Property Investor from Corpus Christi, TX
    Replied 9 months ago
    Craig, what about using hard money to purchase the BRRRR and fund the rehab, then refinancing 6 months down the road? This way you don't have your own money tied up in the deal for 6 months.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hey Clint - yes! Exactly what Sasha and Cameron said above.
    Sasha Fukuda from Walpole, New Hampshire
    Replied 9 months ago
    I personally think that's risky for a new investor who doesn't have a construction background. For my first deal I got a multi family in a good area that came with good, long term tenants, and that's what I'd recommend that other newbies do.
    Cameron MacDonald
    Replied 9 months ago
    Hey Clint, he touched on this in the beginning briefly: "If your goal is to use expensive money (hard or private) to get the deal and complete the rehab and then to refinance at a lower rate later, this article is not for you. Keep doing what you’re doing!"
    Kyle Parks Real Estate Broker from Hendersonville, NC
    Replied 9 months ago
    Great article! Thanks Craig. Everyone needs to understand what their goals are and create and action plan that works for their life and those goals as well as the area that they are looking to invest in. BRRRR might work for some and not for others, it might work in some markets and not in others. Do your research and come up with a clear concise action plan then, TAKE ACTION!!!
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks, Kyle! That's exactly right!
    James Green
    Replied 9 months ago
    You can refi in 1 to 30 months seasoning with several lenders I work with. 5.25 -6% 30 yr
    Miguel Castro Rental Property Investor from Miami, FL
    Replied 8 days ago
    Hi were these lenders ever posted?
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Really? I have not heard of this. I am certainly open to seeing who can do this! If you to dare to share. They'll likely be getting a whole lot of business.
    Shawn Keeley from Bar Harbor, ME
    Replied 9 months ago
    I'm interested in the 1-3 month period as well. Please share lenders if you are willing. thx!
    Rashonda Montgomery
    Replied 9 months ago
    Can you share those lenders with me as well :)
    James Green
    Replied 9 months ago
    1 to 3 months
    Brent Watanabe Architect from Milwaukee, WI
    Replied 9 months ago
    Care to share any of those? :)
    Alex Bekeza Lender from Los Angeles, CA
    Replied 9 months ago
    The reason I serve so many BRRRR investors is by being able to cash them out into a 30 year fixed term off of 75% of newly appraised value as early as 90 days. You don't need to wait 6 months if you find the right lending partner. I don't understand the 5% down turnkey rental strategy. What market are you finding properties cash flowing well at 95% LTV?
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hey Alex - It seems like MOST require this 6-month seasoning period. I am sure that there are some that don't, but I am sure they charge more? IT's not 5% down turnkey rental. It's 20% or 25% down. The strategy there is that if you can accumulate $20k to 25k relatively quickly, it might be better to just do that rather than to BRRRR.
    Erik Verkaaik from La Mesa, California
    Replied 9 months ago
    Q: what "proof" must borrower provide to demonstrate that Rehab work is done? Q2: Does Brrrr succeed in Depreciating asset value climates? (U can tell I'm a newbie, Right?)
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Erik - Many times the bank will send someone out (an appraiser) to look at the property. Also, the lender frequently requires receipts. I wold not BRRRR in a depreciating asset value climate. that gives you a tremendous head wind when it comes to trying to refinance.
    Eric Allgeier Rental Property Investor
    Replied 9 months ago
    You didn’t even mention my biggest concern with BRRRRs: When you cash-out refi your payment is so much bigger that it slashes your cash flow. Say you buy a house at 50k put 20k in and refi at 100k. You get your money back which is good but now your payment is $750 and your rent is $850. So you get $100 per month, which will be gobbled up fast by repairs and vacancy. BUT if you buy a similar house that is decent for $75k/$600 payment and rent it for $800. I just doubled my cash flow and didn’t have to do much of anything aside from the down payment. These are real numbers that I see in my area everyday but maybe there are better spreads out there. I keep finding this is the case for nearly every deal I analyze. It is great for long term wealth and sustainably acquiring properties if that’s your goal, but cash flow- not so much.
    Laura Verderber Rental Property Investor from Fairhope, AL
    Replied 8 months ago
    That's not equivalent. Why not refinance at the $70,000 that you put in, not $100,000. Then you would have equity, cash flow, and you'd get your money back. Besides, good luck finding a $75,000 on the MLS that's as nice as a $100,000 property.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Great discussion here! I have nothing to add. All of my points have been said!
    Nic S. from San Mateo, CA
    Replied 9 months ago
    boom!
    Dan Heuschele Investor from Poway, CA
    Replied 9 months ago
    I have done quite a few BRRRR. Assuming the LTV and terms pre refinance is the same as post refinance, my experience is the cash flow is virtually unchanged. Here is why: Lets assume 75% LTV. If I have a $200K unit at purchase ($150K loan) that after rehab/refi is a $300K unit ($225K loan) what I typically see is that the rent has gone up at about the same percentage. For example if the $200K unit had a rent of $1,500 pre rehab, it now has a rent of $2,250. The rent to value ratio basically is unchanged and set by the market. So my experience is the BRRRR does not significantly help or hurt the cash flow. It does increase my equity, reduce the amount I have invested, and likely reduced my near term maintenance/cap ex. It has not noticeably helped cash flow (nor hurt it). Anyone doing a BRRRR expecting cash flow to increase with similar loan post refinance will likely be disappointed.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Great contribution here, Dan! Thank you!
    James Caporiccio Investor from Newburgh, NY
    Replied 9 months ago
    So don't cash out 100k, cash out your original investment, 70k in this example and it will cash flow higher. I just finished a BRRRR deal and could have cashed out at 75% LTV. I chose to just take enough to cover my investment and a little extra for reserves, 62% LTV and even got a better interest rate for having more equity. It cash flows over $200/mo with -5k in the deal.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    This is awesome James and a great example! Thank you!
    Brad Shepherd Syndicator from Austin, TX
    Replied 9 months ago
    If you do this strategy correctly, you have $0 into. Doesn't matter if it's $1/ month in cashflow. That's an infinite return. This route allows you to accelerate your portfolio growth well beyond what you can do with the traditional route leaving 20% down on each property.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hey Brad- I understand that. The problem is that in the first year, you are not able to buy nearly as much property as you would if you had traditional rentals with that same $100k.
    Erik Verkaaik from La Mesa, California
    Replied 9 months ago
    Thank you Eric for exposing the gaping holes in the blog-based Brrrr strategy discussion. Seems this Stray will only make money-sense is when property is acquired for Well below Market, ...And, it requires very little renovation, ...Unless Cashout APR is 1.5 to 4 points less than First trust deed? U get my drift?
    Kat Rathell Rental Property Investor from Milwaukee, WI
    Replied 9 months ago
    Eric, it is true that the refi payment is higher, but now you have that $100K back to purchase 1 or even 2 more properties with. So, once you get a 2nd property with that refi money, and get tenants in, with, say, $850 worth in rent, in essence you are paying that $750 for 2 cash flowing properties, not 1. Please correct me if I am wrong.
    Jorge Gordon
    Replied 9 months ago
    You missed the most salient point: if cashflow is what you want BRRR is not a cashflow friendly strategy. The more you leverage the less cashflow you inevitably have.
    James Caporiccio Investor from Newburgh, NY
    Replied 9 months ago
    I see a traditional 20% down investor using more leverage. On a traditional 20% down payment investment you have an 80% LTV, plus closing costs. With a BRRRR the most any lender I have spoke to will cash out is 75% LTV. Therefore the BRRRR investor has 25% equity and a traditional investor only has 20%. On 100k property you have a loan for 80k and you have 20k+ closing costs invested. On a 100k BRRRR deal I have a loan of 75k and nothing invested. Which one cash flows more and which has a better ROI?
    Erik Verkaaik from La Mesa, California
    Replied 9 months ago
    I appreciate your contribution Jorge. I think it's time to De-throne Brrr and call it a asset acquiring model with Questionable Cash-flow benefit for All but the Refinance lender. Self-delusion, really. IMHO.
    Ethan Anderson Rental Property Investor from Mountain View, CA
    Replied 9 months ago
    Hey Craig, you absolutely can refi out all of your purchase and rehab costs, into a conventional loan, with no seasoning period. Most lenders understand "delayed financing" as a tool to get your purchase price out without any seasoning period. Far fewer lenders understand that you can pull out rehab costs if you include them on your Settlement Statement. I'd be happy to intro you to a lender that fully grasps this, if you like.
    Laura Verderber Rental Property Investor from Fairhope, AL
    Replied 8 months ago
    Ethan, please let me know about the lender.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hey Ethan, I am aware of this strategy for sure and I thank you for contributing. This is definitely better than waiting the 6 months. The problem here is that you have to buy the entire property and rehab with cash initially. Even if you have the cash though, you'll need to wait the amount of time the rehab takes before you can refinance out of it. I still don't believe you can acquire as many properties in a finite amount of time using the BRRRR strategy when comparing the traditional rental.
    Keith Shadle from San Diego
    Replied 9 months ago
    Hi Ethan, I just did this and completed my first BRRRR using Delaying Financing and got the majority of my $ back out plus my rehab costs as well in about 4 months. Would have been sooner, first one and all. I called a few title companies and asked if my rehab costs could be included on the HUD-1 form (or ALTA statement/Settlement Statement) and they all said Yes after a bit of trying to figure out what I really wanted to do. They would give me draws on the rehab funds in escrow when I needed to pay off my credit card that was used to pay the contractors. I got all the info from podcast #301 with Alex Felice and simply followed his steps. I got too confident and bought a duplex that I am trying to do the exact same thing with. ARV is a kicker!...though will help with the cash flow as others mention. Getting $ back ASAP seems to be many folks reasoning for Burrr. It's mine. I'm wondering if you can use Hard/Private $ for the majority of your down payment to purchase via conventional methods as long as the cash flow makes sense. Set up a note on your own? Keep that velocity of money going! Love the simple back to basics approach. Thanks for the write up.
    Brent Watanabe Architect from Milwaukee, WI
    Replied 9 months ago
    Ethan, I’m interested in knowing about this as well. I recall reading a post or two about delayed financing, but I would rather have the actual person doing the lending understand it better than myself. Does this person work in the Milwaukee area?
    Jeff Hug from St Peters, MO
    Replied 9 months ago
    Does this lender serve Missouri?
    Mark N. Attorney from Kansas City, MO
    Replied 9 months ago
    Ethan- I'm interested in connecting with lenders who understand delayed financing. I'm in the Kansas City area. Thank you.
    Peter Philando Rental Property Investor from Hollywood, FL
    Replied 9 months ago
    I saw a guy talked about this strategy on one of the podcasts. You will need to have a good relationship with the contractor or have the title company do the disbursement of the draws. I understand the season period is to get the current appraised value otherwise the bank can only refinance at the purchase price (with no seasoning). If the rehab is included as part of the purchase on the HUD then you can immediately refi.
    Simon Stahl Rental Property Investor from Oakland, CA
    Replied 9 months ago
    I have never heard that the tenant move in date would matter. Every lender that I've talked to (and there were many of them) starts the seasoning on the purchase date. There are also ways around the seasoning. Either you use a non traditional lender with no or a very short seasoning but higher rates and fees, or you find yourself a lender that can do a delayed financing that includes the rehab costs. A lot of lenders could actually do that - they just don't know about it. So your max loan amount suddenly became the lesser of 75% of ARV or purchase plus rehab costs, which is basically the definition of a BRRRR.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hey Simon, Interesting... that is different from the ones I've talked to. Either way, it doesn't take away from my point in that you still have to wait SIX MONTHS. If I am trying to acquire as much passive income in one year, I can do so much faster by traditional rental property without much head ache. A large reason for this is that I am able to save $20k for the next down payment in well under six months.
    Sam Dangremond Investor from Pueblo, Colorado
    Replied 9 months ago
    It's easy to get cash-out refis with no seasoning period with a portfolio lender. Done it myself like a dozen times.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Yes - but either way, you 'll have to wait until the rehab is done. That will likely be at least three months. With traditional rentals, I can purchase five all at the same time!
    Sasha Fukuda from Walpole, New Hampshire
    Replied 9 months ago
    As a new investor who's trying to replace his income, i've largely reached the same conclusion. Single families and BRRRs just don't help me reach my goals. I go for multi families in good areas. I currently have one, and i think I'll need around 6 of them.
    Erik Verkaaik from La Mesa, California
    Replied 9 months ago
    Hi Sasha. I'm Erik in San Diego (Xspensive!). I'm eyeing multifamily ...I'm hoping U don't mind divulging what building type u buy, & what favorite deal structure u rely on. Thks in advance.
    Peter Philando Rental Property Investor from Hollywood, FL
    Replied 9 months ago
    Yes, multifamily will get you there faster but you can still BRRRR.
    Ramon Jacobs
    Replied 9 months ago
    Hi Craig, can you elaborate on how we can do: "With traditional rental property investing if you have that same $100,000, you will be able to buy five properties with 20 percent down immediately." please. Ps
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hey Ramon, So if you have $100k. You can likely do one BRRRR deal at a time in a relatively cheap market. You buy a property for $75k, you put $25k into it and hope that it values at $120k so you can pull some or most of your money out. With traditional rental property investing you can take that same $100k and invest it in 5, 20% down properties that need little to no work and can get immediately rented. 20% down of $100k is $20k. So you'll have room to purchase five.
    Tracey Geary Rental Property Investor from Eatontown, NJ
    Replied 9 months ago
    Interesting. This is exactly the dilemma I am sitting on. I want cash flow to fund financial independence. I have a nest egg that can fund a BRRRR and know of lenders that don't have a seasoning period so I can get a faster turn. OR I can buy X number of properties that cash flow as soon as a tenant is placed. Internal debate is ongoing!
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hey Tracy - If you want the highest possible ROI, I recommend the BRRRR Strategy. If you are looking for maximum cash flow in the shortest amount of time, I recommend traditional rental property investing. What plays into this though is how quickly you can save up for that $20k down payment without any sort of refinance on the properties you purchased.
    Rashonda Montgomery
    Replied 9 months ago
    Can you share the lenders you work with?
    Isiah Ferguson Investor from Charlotte, North Carolina
    Replied 9 months ago
    This is so me in this season. I started to ask myself what’s more important ROi or Cashflow. Ever since I started to think about investing Cashflow has be king. But learning the BRRRR strategy and learning high leverage has me second guessing things.
    Joe McGovern
    Replied 9 months ago
    +10
    James W Fitzgerald Rental Property Investor from Henderson, NV
    Replied 9 months ago
    Thank you for the post.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks James!
    Susan Maneck Investor from Jackson, Mississippi
    Replied 9 months ago
    I have what others would call 'pigs' because I buy property for in the 15-40K range. It is not that the houses are that bad, but the whole state (Mississippi) is made up of PIGs while rents are relatively high.. I have to wait a year to refinance (actually finance since I buy with cash) and then I don't use conventional financing, I get a HELOC at a teaser rate and renew it each year. Saves on closing costs and rates usually remain quite low. I end up paying less than $200 on a mortgage for a house that rents for $850. Yeah, I can only buy a house or two a year, but I don't have time for any more than that anyhow.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Interesting strategy, Susan! Thank you for sharing!!
    Peter Philando Rental Property Investor from Hollywood, FL
    Replied 9 months ago
    The point of a BRRRR is to do your numbers upfront and be very accurate. The strategy is actually executed on the purchase because that's where you have the most control. My first 2 properties were not good execution but the other 2 were spot on. I look for $300 min cashflow after refinance, but I know this before I even put in an offer ...... because I need to know to ACTUALLY make an offer that FITS my strategy. I refinance using a Hard Money lender and I pay more for the refi and interest rate, but I know that going in and I still cash flow $300. I would actually buy from the MLS and refi via a HML so that there are no properties in my name or credit. Now I am looking for deals where I can get a mini flip, which is actually getting all my investment out plus and extra 5K - 15K .... that's my goal. I now have to start finding my own deals becasue to get properties that discounted, you will need to be negotiating with the property owners/seller (cold calling).
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Great contribution! Thanks, Peter!
    Jimmy Epolito Investor from Clermont Florida
    Replied 9 months ago
    I am planning a mixture of 2 strategies. BRRRR to put my capital to work and save a down payment on the side to purchase using a conventional MTG. I am going to use my HELOC as capital to BRRRR with. Cash out refi, pay off as much of HELOC as possible, the repeat.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Great strategy that has been proven to be successful for multiple investors!
    Gary Thompson Real Estate Agent from Cottonwood Heights, UT
    Replied 9 months ago
    thank you, great article and sound advice!
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks Gary! Glad you enjoyed it!
    T.J. Phifer
    Replied 9 months ago
    Correct me if I am wrong but I didn't see any reference to how long your $100K would be tied up in 5 properties so it seems like an unfair comparison to explain that you wouldnt be able to pull out all of your cash in at least 6 months (which several others have already said this is possible) but let's use the 12 month example for the sake of understanding. How long would it take you to get your $100k or even most of it out of those 5 Traditional Rental Deals. I definitely agree it depends on everyone's goals but for those of us that don't have $100k surplus every year being able to recycle even most of our cash in as little as 12 months compared to the time it takes to get our money out of the Traditional rental property seems like it could be a game changer. I was really shocked to see this comparison was missing and I am a complete newbie so if I am missing something someone please feel free to educate me.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Hey TJ - sorry for the delayed response here because your question is an important one. My main point here is that in the course of 12 months, you are really only able to successfully execute a maximum of two BRRRR deals with $100k. So at the end of the year, you will have two cash flowing properties with hopefully (but likely not) $100k in the bank to continue investing. Let's say each property cash flows $200 each. So you have a maximum of $400 of cash flow. If you buy 5 rental properties with 20% down and no rehabs. You pretty much immediately get $1,000 of cash flow per month immediately with very little work. Those properties can service themselves and you can go out and earn more money through different side hustles, being better at your job, etc. Once you save up another $20k, you can purchase the next one. This article definitely assumes that someone is able to stash away money at a high and fast rate. I do mention in the article that the BRRRR strategy will provide you more wealth over a longer term period (5-10 years). However, if you are looking to achieve Financial Independence in the next year or two, the good old fashioned rental strategy will serve you best.
    James Caporiccio Investor from Newburgh, NY
    Replied 9 months ago
    Excellent point which no one addresses that when speaking out against the BRRRR strategy. You could spend 100k in down payments to get 5 properties and then not be able to buy another for years. You can absolutely find lenders who will loan with no or shorter seasoning periods so you can get your money back much quicker than a year. Who really grows faster?
    T.J. Phifer
    Replied 8 months ago
    Right? I was really hoping for a response on this in case I am missing something which I assume I am because I am so new to all of this. Hopefully someone will help to shed some light on this aspect of the conversation because I feel that it is pivotal.
    Paul Sterman
    Replied 9 months ago
    Hi. I am not following. If I just buy a house to rent I am putting 20% down and I actually make ZERO profit until I first get the 20% back. Cash-flow means nothing when I had $20,000 to start, decided to put it in a down-payment and now have to wait 10-20 years just to get back the $20,000 I already had at the start. As a long term investment, sure, but not as a short term passive income generator. In short: What's the point of having "cash-flow" if I ALREADY HAD THE CASH prior to deciding to throw my cash at a downpayment, not to be retrieved for 10-20 years?
    Heath Weber from West Grove, PA
    Replied 8 months ago
    Don't forget that the cash flow isn't the only way you are financially benefiting from the investment. The tenant is also paying down the loan balance and increasing your equity with each rent payment. So, if you're cash flowing $200, and also paying $500 toward loan principal out of each rent payment, you're recapturing your $20k down payment at the rate of $700 per month, which will only take a little more than two years to recoup. Yes, the equity isn't liquid, that's true, but you are recapturing that $20k fairly quickly in terms of overall ROI. If you want access to that equity, get a HELOC on the property.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Paul, I don't understand your point? When you put $20k down on a property, hopefully it will cash flow you $200 to $300 a month immediately. If you throw $100k down into five properties, you now have $1,000 to $1,500 cash flow IMMEDIATELY. No rehab, no holding periods, nothing. You get the cash flow immediately. The BRRRR strategy is great for building long term wealth and you will no doubt be richer by BRRRRing if you do so for 5-10 years. However, if your goal is to achieve financial independence and increase cash flow as much as possible in the next 12-24 months, the traditional rental property strategy will generate more cash flow for you.
    Tim Murray Contractor from Alexandria, VA
    Replied 9 months ago
    I have only completed one BRRRR (2019) so I am no expert, but I have to disagree with part of point #1. I purchased the property, completed the rehab right at the six month mark, and was able to take my lender a signed lease and begin the refinance portion prior to the tenant moving in. As far as seasoning goes, the lender only cared that I had held the property for 180 days and had a signed lease. I don’t think this is uncommon or difficult to find. I feel that I got a competitive rate as well
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks for the contribution here, Tim. I am glad you found a lender. Either way, you had to wait 6 months to pull that money out. If you are looking to achieve financial independence as quickly as possible, six months is a long time. At the end of that six months, you have put a lot of work and effort into increasing the equity, yet you only have one property cash flowing you $200 per month (assumption) whereas I would have 5 generating $1,000 total. Again, if you're in it for long term wealth building, BRRRR is one of the best. If you're trying to get cash flow as quickly as possible in 12-18 months, I think rental property is the way to go.
    Laura Verderber Rental Property Investor from Fairhope, AL
    Replied 8 months ago
    Craig, I often have 2 or 3 BRRRR deals going on at the same time in different stages. So you can certainly have more than 2 deals per year. I know an investor who regularly does more than 10 a year. Also, I think it is likely that you can pull out all of your money that you put in after you refinance. I do it all the time. You just have to run the numbers. The only property I left money in was my first attempt with BRRRR. Left $6,000 in but still not too bad of a cost to own a property. You say you have to put in a lot of work managing a BRRRR. It depends on the person. Where do you want to put your effort? In your W-2 job to save up money or creating equity in a BRRRR? I enjoy what I do so it's work but I do not feel like it is hard.
    Rashonda Montgomery
    Replied 9 months ago
    Do you mind sharing the lender you worked with?
    Ron Gantt Investor from Chino Hills, CA
    Replied 9 months ago
    This article was a breath of fresh air. Thanks for having the courage to go against the grain. I really appreciate you making the timeline clear. Very encouraging. Now back to working on increasing my savings rate.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks Ron! Glad you enjoyed it!
    Joel Trout from Cadillac, mi
    Replied 9 months ago
    Having never completed a BRRRR, I'm no expert, but it seems like you are missing the point of BRRRR. Using your example of $100k of your own money, you will have a house worth at least $142k (70% rehab rule.) This should rent for around $2130 a month (I use the 1.5% rule instead of the 2% rule.) Assuming 50% of the income goes to expenses, which in a newly rehabbed house with low to no maintenance and CapEx should be better, that is over $1000 a month cash flow. Assuming you can only get $99400 out(70%LTV) you still have your 6 months seasoning period with no mortgage for over $6k cashflow, and over $500 per month cashflow after you get your mortgage. Repeat this 4 more times and you have over $2500/ month in cashflow, and all of your $100k left to keep investing. In your alternative, buying 5 houses with 20% down, your monthly NOI would be would be $3750(using the same 1.5% rule) and your mortgages would be about $1900. This results in a cashflow of $1850. $650 less per month than with the BRRRR method, with $113k less equity, and with $100k less cash to continue investing. Seems to me like the BRRRR method is better all around. (Sure, it will take 2 to 3 years to get to 5 houses with the BRRRR, but after 2, your cash flow is almost the same as 5 turn key(because you don't have a mortgage on your last property) and will you really find 5 properties that are good value on the same day? (Or get a bank to loan on 5 properties on the same day to someone with no track record)
    Heath Weber from West Grove, PA
    Replied 8 months ago
    Why do you assume that specific amount of rent ($2130 per month)? Rent amounts are dependent on your market, your competition and several other factors, not by a math equation or arbitrary rule. I've never seen a case where you could just multiply your property value by 1%, 2% or whatever rule you like to apply to arrive at your rent amount. You have to consider the market conditions and set your rent to be competitive. And there is certainly a law of diminishing returns where rents don't necessarily increase in lock-step with property value once property value exceeds a certain threshold. For example, in my market, you can buy a $100k property, and you may be able to get $800 - $1k in rent each month, so you might be at or near meeting the traditional 1% rule. But that certainly doesn't mean that a $200k property will rent for $2k per month, and the higher the property value gets, the more the rent lags behind. A $400k house might only rent for $2,400 per month, nowhere near the 1% rule. Let's not also forget that the BRRR method is a great deal of work and time to manage the rehabs, especially for a newbie who doesn't yet know what they are doing or have the relationships with contractors, lenders, etc. that are needed to be successful. Most people, especially those that have a day job or career, family, etc., don't have the time to effectively and successfully do this. So when considering which investment strategy to use, you have to be realistic with what you have the time, knowledge and energy to do. The BRRR method is great for someone who is operating a business rehabbing properties, but maybe not so much for a passive investor.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Joel, I think you missed a key thing I mentioned in the article. I am not going to disagree with your point here because I agree with it. Over the course of the long term (5-10 years), you will no doubt become richer with the BRRRR strategy. This article was for someone looking to achieve financial independence as quickly as possible. The only way to achieve financial independence is through passive cash flow which is obtained through rental properties. It'll take much longer to achieve that with the BRRRR because with $100k per year, you can only do so many.
    Kenietta Douglas from Saint Louis Missouri
    Replied 9 months ago
    I really enjoyed reading the article and all the comments. As a complete newbie still saving for the first deal, the points everyone made were very insightful.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks Kenietta! I am glad you enjoyed it. This is what BiggerPockets is all about :)
    Omar Samaniego from Midland, TX
    Replied 9 months ago
    Would love to know lenders that would do refi after rehab in 1-3 months. Thank you!
    John Murray from Portland, Oregon
    Replied 9 months ago
    I've done 9 BRRRR properties. You have to purchase 20-30% below market and complete rehab in 2-3 months. I do all my own work and refi when I can clear about $50K+ on each property. Lenders will require a seasoning period depending on the lender. I'm liquidating my inventory when a tenant moves out, convert to 1st or second mortgage, my live there may not. Usually will sell off the house I lived in for 2 years and try to avoid recapture through paper loss. Throttle AGI to avoid capital gains if possible. Try the best I can.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied 8 months ago
    Thanks for sharing John!
    Erik Verkaaik from La Mesa, California
    Replied 9 months ago
    Hii Craig. Thank you for being a bit of a divergent thinker, ...for tilting the BP user community away from Groupthink regarding our dreams vis-a-vis Real Estate Investing. My goals for finances are in development. I had a rough start in life & have become quite stress-averse. That said, I'm enamored w/the concept of "money working for me", so Im not forced to go join some team somewhere while watching younger ones get promotions ahead of me. I know, I sound like a lazy loser, ...but that's not who I am. I wonder - shifting topics a bit - what you think a/b 2nd/3rd trust deed investments, as compared to holding property & having to worry about it 24/7?
    Aaron Brown Rental Property Investor from Independence, MO
    Replied 9 months ago
    I did a cash out refi in 2 weeks after purchase, you just have to know the right lender! I bought a house in December for 36,000 cash. Already rented for $650/mo. Took it to the Bank two weeks later and got it appraised for 62k(it was that good of a deal on the purchase). The only thing I did was fix a door and raise rent to $700/mo. About a week or 2 later i cash out REFI'd at 75% LTV. In other words got 46k cash and slapped a loan on it. Essentially I would have walked away with 10K additional cash more than I had in the deal. But, That same day at the closing table I rolled it into my next deal I had a contract on for 32k, didn't technically ever see all the cash, since it went into the next house, but I did get a check for about 15k! Haha With that said, this was a home run or gland slam type of deal that you hardly ever see in today's market, and you have to look every single day.
    John Anderson from Kansas City, MO
    Replied 9 months ago
    Aaron, I am in the KC area as well and am looking to start investing here soon. I am working on educating myself further on the in's and out's of the financing process to use the BRRRR. I want to make sure I have a pretty good idea of what I need to do/ask before hand so I can protect myself and capital. Can you send me the name of the lender you use so I can do some research and ask the questions I have regarding this process to see if they would be a good fit? That would be greatly appreciated.
    Aaron Brown Rental Property Investor from Independence, MO
    Replied 9 months ago
    Regardless of my story above being contrary to the seasoning point of the original poster of the article, everything else I pretty much agree with and appreciate the article from Craig. Also, it's definitely true that if you pull all of your money out the deal doesn't cash flow per month nearly as good with a higher monthly payment. It does let you recycle your money quicker though into the next deal.
    Keith Amado Rental Property Investor from Durham, NC
    Replied 9 months ago
    Really good post. BRRRR has definitely been the hot and trendy topic as of late. Thanks for providing another perspective.
    Lauren Davila Rental Property Investor from Charlotte, NC
    Replied 9 months ago
    Wouldn’t traditional purchasing (putting 20% down + repair costs) still put you at a slow growth of 1-2 properties a year? Especially in today’s hot market, it’s hard to believe purchasing the traditional way will produce any faster portfolio growth than BRRRing.
    David Corder
    Replied 9 months ago
    I love Brrr When the market crashes the 100 per month cash flow will be garbonzo. I will be buying properties that investors lost due to using that strategy. The better advice would be to take your time dont rush it concentrate on better cash flows. What makes better sense, having 3 properties cash flowing 300 or having 1 property cash flowing 300. Remember prices have gone up since 2011 and every 9 years we have a mild correction and about every 18 years a major correction. Make sure you protect yourself with a good cash flow.
    Dastyni Loksa
    Replied 9 months ago
    Thanks for the article Craig. If nothing else it gives us something to chew on and consider, which is always a good thing. I do have a few questions though. It seems fairly clear that traditional investment can outpace BRRR in the short term. But when does the BRRR method outpace the traditional approach's income? If we assume everything in your article, (leaving 10k into each deal, a 1% rental return/month for the BRRR method due to risks and potentially higher rates, 2% rental return/month for traditional approach, the same property costs, and no catastrophic events on either side) at the end of 5 years the BRRR method matches the cash-flow of the traditional financing but has made 20k less over the course of those 5 years. There are a lot of costs not included here, of course, but the BRRR method comes out of the 5 years having spent the same total amount, has twice as many cash-flowing properties, and is making the same amount of income. Is the benefit you are chasing really only over 20k in the first 5 years? That aside question, I don't feel like your article lives up to demonstrating a method to "attain financial independence as quickly as possible through cash flowing rental properties" without large sums of money to invest up front. Am I missing something? I will be in a position to (and am committed to) start investing toward the end of the year and would really like to understand these sorts of considerations.
    Alex Chuo
    Replied 9 months ago
    Hello, I'm a fairly new investor and have some success with First Bank. They're based out of CO, but have different branches in CA and AZ. The broker that I'm working with is currently doing a cashout refi at 75% ARV for two properties that have less than 6 months in my LLCs.
    John Murray from Portland, Oregon
    Replied 9 months ago
    The IRS will require the proceeds to be reinvested in real estate. This means either purchase or capital improvement or repair. Most will purchase addition investment property. The IRS may question the safe harbor on investment or personal real estate. I have always reinvested in investment real estate. The tax experts would have to advise on that issue.
    Austin Rath Rental Property Investor from Goodview, VA
    Replied 9 months ago
    Great write up Chris. I like to see different perspectives on anything and I thought you explained yourself well. Encouraging everyone to really think about what their goals are before stepping in to any investment cannot be overlooked. You definitely have me a different view on BRRRRing. Making me thing that it may not necessarily be the best place to start. Like you said, it’s difficult enough to get your first few properties, making those reno projects on top of it creates much more knowledge and work and may not be a smart move if you want to feel good about continuing on a path of real estate investing. Mitigating stress levels on initial investments makes total sense. Learn the more basic strategies first, then move on to more involved processes like rehabs. Great article!
    Austin Rath Rental Property Investor from Goodview, VA
    Replied 9 months ago
    *Craig.. sorry about that. Why can’t I edit this post??
    Brent T Galbreath Rental Property Investor
    Replied 9 months ago
    Really good stuff. I’m a new investor and need all the facts. Sounds like there are many ways to skin the cat but knowing your desired outcome is key! Thank you so much!
    Shankar Ramani
    Replied 9 months ago
    This is great. For a moment, I thought this article took a leaf out of my real estate investing book. I have a lucrative full time job - my primary goal is to save up for retirement and my children's education. I follow this very strategy and sometimes even with very little cash flow but by buying and renting out properties in great school districts that have higher appreciation potential instead of immediate cash flow each month. That's because I don't really need the extra cash flow - I only need the rent to cover all my expenses and make it feel that I own and rent a property but don't pay anything for the next 15 to 30 years except my initial downpayment. After the mortgage period and at the time when I retire, voila, I will have a bunch of properties all paid off, some appreciated well and also generating cash flow that will be my retirement income each month. A couple of the homes will each serve as my children's college education fund. No stock market, no financial risk and no fiddling around with exotic investments even though they may get higher returns. I'm into a marathon, where I don't feel the strain of running and yet I still feel I'll win in the end. Even if my properties fall in value, I'm still only counting on the returns from my tenants paying off my mortgage and the rent each month once the properties are paid off - I may never sell most of the properties, each of which is carefully chosen to be in a pristine neighborhood.
    Brett Nissen Real Estate Agent from Jacksonville, FL
    Replied 9 months ago
    Craig - THANK YOU for writing this! As an agent I work with a lot of investors, and constantly have new investors say, "I am looking for BRRR properties, so I can build cash flow and quit my job in 5-10 years". I then have to go through the education piece of explaining how cash flow is often very limited when a loan is taken off of the post rehab ARV. Yes, BRRR can be an amazing strategy for your NET WORTH, but in my market is not a strategy if the goal is financial freedom. Investors need to look at their goals and decided whether the #1 goal is cash flow or net worth/appreciation. Sometimes you can get both, but focusing on one and your WHY usually leads to the best results!!
    Brad Shepherd Syndicator from Austin, TX
    Replied 9 months ago
    All three of your reasons listed here stem from not looking hard enough. #1 - Talk to more lenders, especially mortgage brokers. My guy starts the refinance process the day I close on the purchase of the property. And yes, I use other people's money for the purchase and rehab cost. Days after tenant is placed the refinance is closed (my short term lender is cashed out). If you can’t find a lender who doesn’t require six months of seasoning, get to work until you do. #2 - Purchase correctly and manage the rehab well, and yes, you get 100% of your funds back out. Most of my most recent projects have put cash back in my pocket even after paying off the short term loan. Can't do that with a traditional rental! If you can’t find a property where the numbers make sense, get to work until you do. #3 - Hand off the rehab to your property manager. They’ll manage the project using their own subs. Mine does it with a very small markup. If you haven’t found a PM who can manage a rehab, get to work until you have.
    Laura Verderber Rental Property Investor from Fairhope, AL
    Replied 8 months ago
    Agreed.
    Cel Arrington Rental Property Investor from Roanoke, VA
    Replied 9 months ago
    @Craig - Thanks for the great article. You brought up some valuable insights. I do want to push back a bit on the following assertion: "If you have $100,000 to invest in a BRRRR deal, you will not be able to recycle that money for at least six to 12 months. So, in one year’s time, the maximum amount of properties you could obtain is two. With traditional rental property investing, if you have that same $100,000, you will be able to buy five properties with 20 percent down immediately." In the context of the article, you were implying that you can actually do more with a fixed amount of money with traditional purchases than you could using BRRRR. The problem I have with this is what happens after you've purchased those 5 vs 2. At that point you're spent using a traditional model, and for most people getting another $100,000 of your own money to invest with takes a very long time. BRRRR presents the opportunity to repeat the process. In my case, I may be able to pick up 2 properties per year using BRRRR, but I can do that every year. So, in 3 years time, I will have 6. Also, after that 3 years, I will still have the majority of my original $100k as working capital. If we assume the same rate of savings for a traditional vs BRRRR investor, I am now in a far superior position to the traditional investor, because I have some % of my original capital, plus whatever I've saved over that 3 years, which I could use to buy traditional, or increase the number of BRRRR properties I can do per year. Thanks again for all of your contributions to this awesome community! Would love to hear your thoughts.
    David Featherstone Rental Property Investor from Los Angeles, CA
    Replied 9 months ago
    Loved the article Craig! I like the reminder to consider all points of view and felt like a learned a good deal from this article and ways to critically think about different deals
    Jennifer Donley Rental Property Investor from Saint Louis, MO
    Replied 9 months ago
    Thanks for this article - I love different perspectives. I've done both money down deals (usually with tenants in place) and BRRRR deals (5 so far), and haven't had to leave money in a BRRRR yet. I usually walk away with a check (not a big one) after closing as well. I have a credit union here that will finance up to 80% of ARV without a seasoning period (have to have a signed lease though). The key is making sure I'm conservative on my ARV and on my rehab estimate, and that I can be all in for no more than 75% of ARV. That leaves me room to pay off the private lender, pay for all the loan fees and have no $ in the deal. Before I make an offer, I make sure that at the 80% of ARV, I can cash flow at least $250 per month after all expenses, reserves and mortgage P&I, and if not, then my offer number has to come down until I can, or I won't plan to finance all the way to 80%. Basically I have to account for that somewhere. Also, I'm buying in B-/C areas so the rent to ARV ratio is strong. I personally like doing the rehab upfront because I can take care of most items that will be a maintenance issue in 1 to 4 years (and would suck out all the rental cash flow if not done). As you might imagine, my problem is not a lack of funds, it's a lack of deals that fit this model. We have to look at A LOT of houses to find ones that work.
    Laura Verderber Rental Property Investor from Fairhope, AL
    Replied 8 months ago
    Wish I could give this a thumbs up!
    Account Closed
    Replied 9 months ago
    I love articles that draw so many constructive comments! Thank you Craig.
    Maurício Marcondes Guimarães
    Replied 9 months ago
    Very good point. And although BRRRR does seem the thing to do right now. Why not get early on cash flow with little to no rehab needed rentals? Even if the cash flowing isn’t as big as a recently renovated house would get. That’s definitely my goal as a newbie. Thank you for the tip!!
    Ryan Bertolami New to Real Estate from Los Angeles, CA
    Replied 9 months ago
    Lots of great comments! Will be coming back to re-read.
    Quentin McNew Real Estate Investor from Champaign, IL
    Replied 9 months ago
    I started investing having to wait 6 months, but now relationships and experience with credit union or community banks now gets me 1-3 month seasoning…… Which is the big game changer. Great article showing the downsides too. All valid points to consider starting out for sure!!
    Bryan Beal Rental Property Investor from Greenville, SC
    Replied 9 months ago
    My lender let's us start the refi within 30 days of original purchase (obviously only if the rehab portion is complete) but still well before the "six months" as stated here.
    Gina Cook Investor from Long Island, NY
    Replied 9 months ago
    great article. I appreciate your realism on this subject. As a newbie looking to purchase my first property long distance, I have been reading and listening to endless podcasts and BRRRR was the direction I thought I needed to go in. With my goal being increased cash flow, your post just gave me a fresh perspective and reminded me that sometimes what your looking for might actually just be in the box!
    Monica Diaz Investor from Fort Lauderdale
    Replied 9 months ago
    Craig, just to be clear, when you say to purchase with 5% down, are you referring to owner-occupied (to get that lower down-payment)? If so, are you also saying that one can purchase shortly thereafter, another property with low down payment, stating to lender that you will owner-occupy? Thank you.
    Nathan Fish Flipper/Rehabber from Raleigh, NC
    Replied 9 months ago
    Thoughtful article - I like the vantage point of think outside the crowd. We're getting started in a new market (Raleigh) and I was able to find a lender with no seasoning period. Our goals focus more on rehabbing properties, but we're also open to traditional if the right deal is there. Flexibility is the key.
    Amelia Lewis
    Replied 8 months ago
    What if you are purchasing properties with cash, and then mortgaging them and pulling just your initial investment out?
    Richard A. Investor from Fayetteville, NC
    Replied 8 months ago
    I agree BRRRR is "situation-dependent." It might not work for everyone in every situation. But, I do not think traditional rental investing is the way to go, ever.
    1. Delayed financing allows you to refi with zero seasoning period. Caveat is the purchase and rehab must be completed with "cash." Cash can be your own cash, lines of credit, or private money lender. Complete the rehab, get it apprised, refi for 75% ARV. Too easy.
    2. Run the numbers as best you can. Thus far, I've been ultra conservative with numbers. Don't do the deal if you can't pull enough money out (or enough money out). With traditional rental investing, your 20% down is "gone." You can't reuse that money for awhile either. In the article's example, yes, you can purchase 5 properties in one year at 20% down with $100k. But, where will you get rehab money from? And, how will you continue to purchase properties the following year?
    Barbara Mack Investor from West Hartford CT
    Replied 8 months ago
    Can you cash out refi on a 4 unit multifamily attained through house hacking (FHA) after the seasoning period although it must be your primary residence for 1 year? Ideally that is what I am looking to do, and then purchase another 4 unit so that under 1.5 years I'll have 8 units.
    Jose Lopez-Ley from Los Angeles, CA
    Replied 8 months ago
    Are there advantages of the BRRR method (vs old-fashioned ready-to-rent) Multifamily rental property when using first-time FHA 3.5% financing?
    Anthony Angotti Real Estate Agent from Pittsburgh, PA
    Replied 8 months ago
    This article is fantastic and I've had this discussion with at least 4 or 5 new investors a week that are looking to get started. BRRRR investing is sometimes the worst way to get started with someone with no experience since it involves a lot of knowledge. Unfortunately it's also the strategy everyone goes to when they are no because it's, "no money out of pocket"
    Dan Sheeks Rental Property Investor from Denver, CO
    Replied 6 months ago
    Great article, Craig!!!
    James Mauck Rental Property Investor from Portland, OR
    Replied about 1 month ago
    I know this is an old post but I like going back and reading things. Craig, I really appreciate your stuff and I like that you try to balance pendulums. And also so many good comments. I just wanted to offer one more perspective I didn't see here yet. From what I can tell, banks look at your W2 income and go over the last two tax statements when determining how much they will loan. If you are just starting out and try to purchase five 100K properties, they want to see that you can fund all five of those with your current income, also taking into account the portion of your income they think you need to live on. So in that first year, none of those five rental incomes will show up on your tax statement. Do you currently make enough to service 500K additional debt? We just ran into this in a recent cash-out refi where I maxed out based on W2 income and couldn't pull the full value. And they couldn't count several revenue streams because they either weren't yet on last years tax statement or I'm still renovating (it takes me a while just putting in weekends). I realize cash-out refi may be viewed differently ie higher risk so this may not apply.