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. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free 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. 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: 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? 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. 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 unlikelyâespecially 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!