Help with the BRRRR method
Member since 2025 · 7 posts · 11 votes
Help with the BRRRR method
Most Popular Reply
Ryan SpathBusiness Member
Real Estate Agent · Boise, ID · Member since 2017 · 580 posts · 379 votesWelcome to BiggerPockets and the exciting world of real estate investing!
You’re in the right place — and the best thing you can do early on is read, read, read. There are tons of great books out there, and a fantastic place to start is with David Greene’s books in the BiggerPockets library.
Another excellent resource is Nate Barger, who runs the BRRRR Academy and an active Facebook group. Even if you don't follow the BRRRR strategy, the community alone is incredibly supportive and knowledgeable.
Get plugged in locally — attend real estate meetups, go to conferences, and surround yourself with others who are doing what you want to do. You’ll learn more from real conversations and real deals than anything else.
Finally, the most important advice: Take action.
It’s easy to get stuck in analysis paralysis, always waiting for the perfect deal. But real success comes from getting on base consistently. If you treat each deal like a base hit rather than swinging for a home run every time, you’ll look back in 10 years and be amazed at what you’ve built.
Don’t wait for perfect. Get in the game.
✅ Pros of the BRRRR Method
1. Build Equity Fast
By buying distressed or undervalued properties, improving them, and refinancing based on the new value, you can rapidly grow your equity position.
2. Recycle Capital
The key advantage: you can pull most or all of your initial investment back out during the refinance. This allows you to reinvest the same money into new deals — effectively “recycling” your capital.
3. Cash Flow Potential
If done right, the property can still cash flow after refinance. You own a rehabbed asset, with tenants covering the mortgage and expenses.
4. Long-Term Wealth Creation
You end up with appreciating assets, growing rent income, and tax advantages (depreciation, mortgage interest deductions, etc.).
5. Tax Benefits
Cost segregation, depreciation, and mortgage interest deductions can all improve your annual tax situation.
❌ Cons of the BRRRR Method
1. Financing Can Be Tricky
You'll likely need two types of loans:
- Short-term/hard money or cash for the purchase and rehab
- A long-term loan for the refinance (seasoning period may apply)
2. Risk of Overestimating ARV
If your after-repair value (ARV) comes in lower than expected, you may not be able to pull out as much capital — or any — during the refi.
3. Vacancy & Rent Risk
You need to find reliable tenants quickly post-rehab. If you can’t rent it at the price you expected, your cash flow suffers.
4. Rehab Challenges
Construction often runs over budget and over time. If you’re not experienced or managing contractors well, costs can spiral.
5. Refi Restrictions
Lenders may impose a seasoning period or require a certain level of occupancy or cash reserves.
6. Market Sensitivity
If the market shifts during your rehab or refinance window (e.g., rates go up further, values drop), your numbers may no longer work.
10 Replies
- 1yRyan SpathBusiness MemberReal Estate Agent · Boise, ID · Member since 2017 · 580 posts · 379 votes
Welcome to BiggerPockets and the exciting world of real estate investing!
You’re in the right place — and the best thing you can do early on is read, read, read. There are tons of great books out there, and a fantastic place to start is with David Greene’s books in the BiggerPockets library.Another excellent resource is Nate Barger, who runs the BRRRR Academy and an active Facebook group. Even if you don't follow the BRRRR strategy, the community alone is incredibly supportive and knowledgeable.
Get plugged in locally — attend real estate meetups, go to conferences, and surround yourself with others who are doing what you want to do. You’ll learn more from real conversations and real deals than anything else.
Finally, the most important advice: Take action.
It’s easy to get stuck in analysis paralysis, always waiting for the perfect deal. But real success comes from getting on base consistently. If you treat each deal like a base hit rather than swinging for a home run every time, you’ll look back in 10 years and be amazed at what you’ve built.Don’t wait for perfect. Get in the game.
✅ Pros of the BRRRR Method
1. Build Equity Fast
By buying distressed or undervalued properties, improving them, and refinancing based on the new value, you can rapidly grow your equity position.
2. Recycle Capital
The key advantage: you can pull most or all of your initial investment back out during the refinance. This allows you to reinvest the same money into new deals — effectively “recycling” your capital.
3. Cash Flow Potential
If done right, the property can still cash flow after refinance. You own a rehabbed asset, with tenants covering the mortgage and expenses.
4. Long-Term Wealth Creation
You end up with appreciating assets, growing rent income, and tax advantages (depreciation, mortgage interest deductions, etc.).
5. Tax Benefits
Cost segregation, depreciation, and mortgage interest deductions can all improve your annual tax situation.
❌ Cons of the BRRRR Method
1. Financing Can Be Tricky
You'll likely need two types of loans:
- Short-term/hard money or cash for the purchase and rehab
- A long-term loan for the refinance (seasoning period may apply)
2. Risk of Overestimating ARV
If your after-repair value (ARV) comes in lower than expected, you may not be able to pull out as much capital — or any — during the refi.
3. Vacancy & Rent Risk
You need to find reliable tenants quickly post-rehab. If you can’t rent it at the price you expected, your cash flow suffers.
4. Rehab Challenges
Construction often runs over budget and over time. If you’re not experienced or managing contractors well, costs can spiral.
5. Refi Restrictions
Lenders may impose a seasoning period or require a certain level of occupancy or cash reserves.
6. Market Sensitivity
If the market shifts during your rehab or refinance window (e.g., rates go up further, values drop), your numbers may no longer work.
- 1yBenjamin AakerPro MemberRental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
I'll also add that in my experience the financing can be a challenge and has been difficult to predict. That's been a factor of the market more than the BRRR method, I suspect. But they do go hand in hand.
Quote from @Nick Larson:
Hi everyone, I'm a newly licensed agent looking to network and learn from as many people as I can. My goal is to have a portfolio of hundreds of properties and the BRRRR method seem like a great way of doing it. Can someone state what some of the most important pros and cons are for getting into this investment method.
Also, I'm looking for a couple real estate coaches that I can learn from in the San Diego area who are experienced using the BRRRR method.
Thank you!
I have done quite a few BRRRRs with in San Diego. I believe it is a much worse time to BRRRR than 3 years ago. This is especially true in San Diego but true in most markets
The reason is interest rates have more than double what since q1 2022 and in San Diego RE prices have continued to increase. End result is that purchases financed at rent ready condition have large negative cash flow. My last 2 purchases I chose not to refi in spite one being up ~$1m above my costs and the other being up ~$500k above my costs. I could extract some of the trapped equity, but I would 1) be paying double the interest rate I have 2) would be very large negative.
In San Diego, and I suspect most markets, the refi appraisals are conservative. I believe they are extra conservative on a refi after a value add (the appraiser typically knows what you paid for the property). I underwrite the refi at 10% below market and hope it comes in only 5% below market. This surprises many people who have not done many BRRRRs.
I strongly believe BRRRRs in this market will typically require patience to achieve a good return. I also believe that the current market is more a flippers market than a brrrr market. Virtually all the high experienced local BRRRR investors seem to be taking a timeout from BRRRRs (at least until there is a gift in the market).
I highly discourage your first BRRRR to be remote (OOS).
Good luck
- 1yAdam KingBusiness MemberReal Estate Agent · San Diego, CA · Member since 2023 · 87 posts · 45 votes
Hi @Nick Larson,
I am a San Diego Native, and have used the BRRR method in a multitude of ways, both locally and out of state.
As many people here have said the methodology behind BRRR does not work quickly in San Diego anymore. They way I have made BRRR work in San Diego in the past is "House Waking". Living in the home during a rehab and several year later moving out, and Refinancing. That was my plan with my current residence, but with interest rates being where they are, those timelines have slowed dramatically.
My Pivot has been to utilize my experiences a flipper, to build a team and BRRR more out of state in Midwest. My particular location has been Wayne County (detroit) Michigan.
The goal to have hundreds of rental properties in your portfolio is admirable, but an ancient Chinese proverb comes to mind "a journey of a thousand miles begins with a single step" - Lao Tzu.
@Ryan Spath setup an amazing pros and cons list for you, so I will keep mine brief.
Pro - Able to scale quickly through leverage
Con - Being a leverage intensive strategy means you are more at risk when mistakes are made and with changing markets, especially when starting out.
I hope this helps, if you want to meet up and talk strategy here in San Diego reach out at any time!
Adam King - NewTown Real Estate522 Reviews - 1yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class affect what type of contractors, handymen and property management companies will work on a property.
If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
FICO Score
Pct of Population
Default Probability
800 or more
13.00%
1.00%
750-799
27.00%
1.00%
700-749
18.00%
4.40%
650-699
15.00%
8.90%
600-649
12.00%
15.80%
550-599
8.00%
22.50%
500-549
5.00%
28.40%
Less than 499
2.00%
41.00%
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.
We can also share numerous examples of properties & portfolios we’ve assisted investors with!
DM us if you’d like to discuss this logical approach in greater detail!
Logical Property Management4.9465 Reviews - 1yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
@Adam King would appreciate your feedback on the Property Class map of Metro Detroit on our website...
Logical Property Management4.9465 Reviews - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Welcome to BP, San Diego area has a great REIA group that I recommend you join. That is where I would start.
7e investments53 Reviews - Real Estate Agent · San Diego, CA · Member since 2023 · 189 posts · 88 votes1y
Quote from @Nick Larson:
Hi everyone, I'm a newly licensed agent looking to network and learn from as many people as I can. My goal is to have a portfolio of hundreds of properties and the BRRRR method seem like a great way of doing it. Can someone state what some of the most important pros and cons are for getting into this investment method.
Also, I'm looking for a couple real estate coaches that I can learn from in the San Diego area who are experienced using the BRRRR method.
Thank you!
Congrats on the license!
The most important thing I have learned so far from being an agent and investor, is that having a specific niche in real estate and becoming the best at it, Is crucial. There is always pros to investing depending your strategy and in what market you are in. The cons will typically always be either high prices, high interest, and low demand for rentals (depending your strategy).
For me I specialized in STR & Co-living concepts. I invest my money in Sacramento where prices are better and growth opportunity still has a lot of potential. San Diego is at peak high prices, nearly impossible to cash flow on deals with regular loans. San Diego is a good place for Investors to park cash and ride the stable appreciation.
Let's connect!
- Member since 2025 · 7 posts · 11 votes1y
Thank you for all the suggestions everyone!
- 1yScott ScovilleBusiness MemberReal Estate Agent · Sacramento, CA · Member since 2019 · 502 posts · 276 votes
Quote from @Nick Larson:
Hi everyone, I'm a newly licensed agent looking to network and learn from as many people as I can. My goal is to have a portfolio of hundreds of properties and the BRRRR method seem like a great way of doing it. Can someone state what some of the most important pros and cons are for getting into this investment method.
Also, I'm looking for a couple real estate coaches that I can learn from in the San Diego area who are experienced using the BRRRR method.
Thank you!
Congrat's on becoming an agent! Best of luck. I've been doing BRRR's up in Sacramento for while now. Happy chat anytime.
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